Navigating the Week in Capital Markets
With Jeff McCarty hosting alongside Alex Hebner and Vimi Vasudeva, and featuring special guest Vince Zenner of Rate, this week’s episode of Optimal Insights unpacks the latest employment data, inflation expectations, and the surging momentum behind non-QM lending. Whether you're managing pipelines or monitoring macro trends, this episode offers the insights you need to stay ahead.
Here’s what you need to know this week.
Market Pulse
Employment Data: A Mixed Bag
ADP numbers were underwhelming at 37,000 new roles.
Jobless claims exceeded expectations, nearing a quarter million.
Non-farm payrolls beat estimates on the surface (139K vs. 125K expected), but revisions erased 95,000 jobs from prior months.
“It feels like maybe even a mediocre number can feel like momentum.” – Alex Hebner
Inflation & Treasury Auctions
CPI and PPI expected to continue downward trends.
Treasury auctions this week (10-year and 30-year) will test global confidence in U.S. debt.
CME futures show diminishing expectations for rate cuts in 2025.
Political & Global Noise
U.S. – China trade talks ongoing.
Section 899 “revenge tax” could dampen foreign appetite for U.S. Treasuries, adding upward pressure on mortgage rates.
The Non-QM Surge
Non-QM lending is increasingly viewed as a strategic lever for lenders seeking to diversify their pipelines. According to Vince Zenner, Rate has experienced significant growth in non-QM volume over the past 18 months and anticipates continued momentum through year-end.
Hedging in a Volatile World
Non-QM hedging isn’t plug-and-play. TBAs, interest rate swaps, and treasuries must be dynamically managed.
Volatility in SOFR-treasury spreads has made passive hedging strategies obsolete.
“This is not the market to put the model on cruise control.” – Vince Zenner
Investment Opportunity
Non-QM loans offer compelling risk-adjusted returns, especially in a 5% treasury environment.
Some institutional investors are exploring non-QM as a complement to traditional fixed-income strategies.
“The era of passive management is over… The new world where all the growth is requires a lot more work, a higher level of skill, honestly, and attention.” – Vince Zenner
Actionable Takeaways
For Lenders
Reassess your hedging strategies – static models might not cut it.
Consider partnerships or tech investments to enter the non-QM space.
Monitor treasury auctions and inflation data closely – they’re setting the tone for mortgage pricing.
For Investors
Non-QM offers a new layer of yield without the volatility of equities.
Understand the nuances – prepayment penalties, income verification, and duration risk all matter.
The mortgage industry is at an inflection point. With economic signals flashing mixed messages and non-QM lending gaining serious traction, adaptability is the name of the game. Whether you're originating, investing, or analyzing, this week’s episode of Optimal Insights offers timely insights for anyone navigating today’s mortgage market.
Listen to the latest episode of Optimal Insights for deeper analysis and expert commentary. Available on all major podcast platforms: https://optimal-insights.captivate.fm/listen
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.