Do ARMs Have Legs in This Market? | Market Insights | June 30, 2025

Jim (: 00:19

Welcome to Optimal Insights, your weekly source for timely market analysis and expert commentary from Optimal Blue. I'm your host, Jim Glennon, Vice President of Hedging and Trading Client Services at Optimal Blue. Our clients and industry partners have long relied on Optimal Blue for trusted insights and commentary, and these podcasts are an evolution of our commitment to keeping the industry informed. Let's dive into today's episode. Welcome, everybody. Welcome. 30th. I cannot believe it's almost going to be July tomorrow.

A bit of a weird one. You've got kind of a three and a half day or lot going on. got month end, you got quarter end. actually, but we're to have unemployment coming out on Thursday, which is also half market day. So weird in a few different ways. And then obviously Independence Day is Friday. So in case you weren't aware of the weird kind of market closure there you have it. We'll probably cover that a little bit later in the market update as well.

Really good show for you today. We're not taking this week off. do a market update here in a little bit. A lot going on there, a lot going on in economy and also geopolitics and obviously with a little bit more drama surrounding the Fed. So we'll cover that. And then thought we would do a bit of an education session today, a little bit of riffing on arms, adjustable rate mortgages. So maybe you're...

newish to the industry or even if you've been around for four or five years, you may not have seen much in the way of arms. you're just curious and you're not even in the mortgage industry and you want to know what actually is an arm. Maybe you've had an arm suggested to you by a loan officer, you've talked to friends about it. you just want to test your own knowledge of a forgotten relic, is arms, which from time to time are fairly ubiquitous in the market. Anyhow, we'll talk arm basics and we'll get into some ⁓

payment examples and just kind of wrap about what arms are and how they work.

Kevin Foley (: 02:12

Yeah, Jim, think

the big question that is on everyone's minds but haven't really seen anyone asking is, do arms have legs in this market? So we're going to tackle that question head on and let everybody know the answer to that.

Jim (: 02:21

Ugh.

Hello.

Beautiful. Yes. We'll talk about if arms have legs in this

Yeah, we'll get to the market update here in a sec, but just in terms of data, OBMMI finally falling, whether that is the economy pushing it or actual data or geopolitics, we're ⁓ below 6.7, which we haven't seen in quite a while. So 30-year fixed conventional, about 6.65.

Range and volume is still strong. You know, seeing refi is continued to continue to come in, but also a decent purchase business here and kind of mid summer months. so yeah, let's transition over to, to Alex and see what's going on in the market.

Jim (: 03:09

All right. Welcome, Alex. Appreciate you being here. A lot going on even in this short week. We had some pretty heavy last week, but some really heavy numbers coming in this week for economics. There's also just a lot of drama surrounding the Fed and a possible appointment of a shadow governor of the Fed ⁓ heating up last week. Where should we start? Maybe just with what, you know, what did we see last week and what are we in for in this short holiday week?

Alex Hebner (: 03:37

Yeah. I don't know. Thanks for having me as yeah, just beginning last week, were seeing, uh, consumer confidence came in, um, pretty weak. yet again, uh, it's kind of been a theme for the past six months or so, just on the, on the longer term consumer expectations. Uh, it was supposed to be at 98, you know, with, a hundred or par being kind of the, the, the median of. Breakoff point between, you know, happy and unhappy consumers, saw it come in at 93. that's.

Jim (: 03:56

Mm-hmm.

Alex Hebner (: 04:05

well below the expectation 98 and then expectations index, which is much more of a short-term focus looking at conditions, inflation, expectations fell an additional 4.6 and this is on its own scale, but it fell to 69. Generally speaking and historically looking back, you know, a reading of 80 or below is recessionary and we've been floating around 80 since 2021. So, so you've been seeing a lot of commentary in.

Jim (: 04:24

Mm-hmm.

Alex Hebner (: 04:31

This will kind of feed into when I start talking about PAL here in just a moment, but you know, lot of commentary in our industry of, it's time for rate cuts and when is PAL going to make the call to, or rather not just PAL, but the entire FOMC board make the call to lower rates, bring down that federal funds rate. And this is a big sticking point. think a lot of them are pointing to is the consumer doesn't have a great outlook. And this is, if you look back, you know, 50, 60 years, amount of time that we've been in a strong labor market, with.

week consumer spending or consumer outlook has never stretched for this long. You always see consumer outlook dip a little bit, and then you see the unemployment rate pretty quickly thereafter follow. And this huge lag that we've been seeing tells me maybe something about the post-COVID environment, maybe their methodology is a little bit off, or if this inflationary environment kind of resulted in a more permanently dour outlook for the consumer, business is maintaining at the very least.

Jim (: 05:03

Mm-hmm.

Alex Hebner (: 05:26

⁓ So I think that remains to be seen, but just something to keep an eye on in regards to consumer confidence. ⁓ Last week as well. Go ahead.

Jim (: 05:33

Yeah, it's like we're

waiting for the other shoe to drop, right? And the consumer just has this lousy, this gray outlook, but the consumer is still spending, the consumer is still employed. Is it tariffs and just this looming, moving deadline of tariffs? it inflation that doesn't seem to quite want to stick at 2 %? Yeah, it's hard to say, but it does feel like the consumers are trying to tell us something, but their actions are different.

than what the surveys would suggest.

Alex Hebner (: 06:03

Right.

Right. ⁓ seems to be, know, I don't expect to have money next week, but right now, you know, I'm going to go out and support the economy. That seems to have been the theme, but for years now, you know, regardless of, you know, who's in the White House and what the economic environment is really telling us, because this has been from both a high inflationary environment down to, you know, relatively low for recent history. So it's a little bit perplexing, but I do think that inflation is probably the biggest driver and just how that, you know, messes with people's math in their head when they're in the checkout line.

Jim (: 06:10

Yeah.

Alex Hebner (: 06:32

and then, yeah, just to round out last week, pal testified, on Capitol Hill with the house financial services committee. pretty much a political rehashing of his, ⁓ questions from the last FOMC meeting. just a lot of, know, when do you expect to make great cuts? And he stuck to his guns as he always does. it says when the data tells us, you know, it's appropriate. so pretty much gridlocked there, nothing new for, for that building.

Jim (: 06:50

Mm-hmm.

Alex Hebner (: 06:55

and then PCE came out on Friday and that's the fed's preferred metric for inflation came in a little bit hot. So, definitely hurting the argument that, we're, ready for rate cuts came in at 2.7 % for core that excludes food and fuel, food and fuel actually brings it down to 2.3%. so, so those core metrics that are historically the more volatile are actually bringing down inflation metrics. but 2.7 % that's, that's, you know,

20 bips above the two and a half, which has kind of become the new marquee for, for, for low inflation. so we'll to see how that continues to play out. like I said, I don't think it's, helping us, in the, the current moment and the arguments that we're seeing. jump into this week. it's employment week, as you said, at the top of the hour, looking at ADP numbers on Wednesday followed immediately by non-farm numbers on Thursday.

Jim (: 07:34

Mm-hmm.

Alex Hebner (: 07:45

Those are not looking super great just based on those, those weekly unemployment claims that we've been talking about for quite a while now. I'm looking for a 0.1 % uptick in unemployment in the overall U3 unemployment rate, which is, which is a big step up. saw it step up just a little bit earlier in the spring from 4.1 to 4.2 and now they're expecting 4.3 % unemployment. this is kind of counterbalancing that, that inflationary argument of we need to have cuts what I think it really points towards is.

potentially that third of a stagflation that we should be most worried about, in my opinion.

Jim (: 08:21

Yeah, this is another area where we're waiting for the shoe to drop. Like Doge was supposed to be the harbinger of doom, right? We were supposed to see a big uptick in unemployment because of that and maybe it was May. Now we're looking at, did it happen in June? And we really haven't seen it. Even if we tick up a 10th of a point, that doesn't say a lot. doesn't get us near like the four and a half barrier where the Fed like even statistically has to pay attention.

Alex Hebner (: 08:45

Right. Right. Yeah. It's slowly creeping up, but it's, nowhere near, as we've said, you know, the, where's the fire. then there's not fire. There's just a little bit of smoke, but no fire that we can see at the, at this juncture.

then I would just caution for, know, just continuing to look forward. Just keep looking at those weekly initial childless claims each Thursday. That's going to be your best smoke signal.

Jim (: 09:05

All right, good. So yeah, watch the numbers everybody. Again, Thursday is very rare that the unemployment report comes out on any other day than Friday, but this time around the holiday is pushing it that way. So you expect so, so numbers. mean, even the estimates are kind of in that lower level and partially because we, I think we're acknowledging things are slowing down, but we're not yet in reverse, right? We have not seen a zero or negative number for unemployment. Although we're seeing, like you said, those weekly.

Unemployment claims, initial claims have been ticking up over the past couple of months.

Alex Hebner (: 09:38

in a further weakening of the labor market, we've definitely seen wage growth creep down.

Jim (: 09:44

Yeah, mean, wage growth was chasing the inflation numbers there, the consumer inflation numbers there for quite a while, right? And when things were really hot, 21 and 22, and then you start seeing that drop off. And obviously when there's wage growth, inflation is a little bit easier to kind of, I don't know, justify or rationalize. People are making more money, they've got more money to spend and profit margins are higher and it costs more to hire people.

So obviously that's going to get passed down to the consumer at some point, but now everything feels like it's got the brakes on it, whether it's the Fed, you know, kind of restricted being in a restrictive stance for a very long time, or it is really just this natural cycle that has gone on for a really long time in a positive way, right? We haven't seen a true recession. You can count the first couple months of COVID, but that really, that's like technical, right? We haven't really had a recession.

since the great financial crisis, at this point is almost 20 years behind us. historically, we typically have a recession, at least a small one every decade or so.

Jeff McCarty (: 10:47

So we've accomplished a true soft landing. And again, nobody wants to convince themselves that we've actually accomplished that. Like you said at beginning, still waiting for that other shoot a drop.

Kevin Foley (: 10:58

thinking about that too.

Jeff McCarty (: 10:58

I guess you gotta

wait for the long term to play out.

Jim (: 11:02

Mm-hmm.

Kevin Foley (: 11:02

Right.

So I think there's a strong arguments like, okay, we were in sort of a soft landing environment. We've been restrictive, there hasn't been a recession. And then you look at some of the dislocations that are still out there in terms of like consumer sentiment versus the unemployment rate. And it's like, have we even landed at all yet? Are we still in the air? And we're waiting to figure out where it is we're going to land. Yeah, it's, it's an interesting, interesting debate going on there right now.

Jim (: 11:18

Yes.

in order to take off again.

Alex Hebner (: 11:27

And I also like to flag, I think,

while we're talking about the technical definition of a recession. saw the, the Q1 GDP numbers brought down from, believe it was negative 0.2 to, to a revised negative 0.5. So, so we're halfway there for the technical definition of two quarters of negative GDP growth. So we'll have to see how those numbers come in. I believe it'll be, we'll get a quarterly GDP report sometime in July. if that one also shows a negative, we're, we would technically be in a recession.

Kevin Foley (: 11:53

the Atlanta Fed publishes their GDP now, which is like a decent sort of real time tracker. It's not always exact, but it's been in the mid twos or so last time I checked for for Q2. So I know that there's been a lot of years where we've seen that like q1 dip and then q2 sort of rebound, whether that's weather, whether that's, you know, just other things going on in the economy, too. So but but yeah, technically halfway there. But but I think I think at least based on what I've seen, it should

should rebound pretty well, Q2.

Jim (: 12:23

Mm-hmm.

All right, what else, gentlemen?

Alex Hebner (: 12:25

That's really all. The following week is relatively quiet following the 4th July holiday. We'll get some consumer credit numbers. I know that's one of your favorite metrics. Keep an eye on just how well the consumer is keeping up with their debt payments. We'll get some Fed minutes for May and then just once again I'd like to say, keep an eye on those initial jobless claims. I think that's where a lot of eyes are right now.

Jim (: 12:46

Good call.

All right gang, good discussion. Let's move on, talk a little bit about arms.

Jim (: 12:52

Okay. Let's get right into it, shall we? So we're here today. I want to talk a little bit about arms, as I mentioned earlier on in the show. You know, arms, they've been a thing as long as I've been in the industry anyway, over, you know, 20, 30, 40 years. And in other parts of the world, they're actually, most parts of the world, it's the only option you have, right? I think we're all fairly aware, at least in this industry, that a 30-year fixed rate loan is pretty unusual you go to other parts of the...

of the planet. But there are markets where arms make sense, even in the US, even when you have the option of going 30-year fixed. And typically that type of market is going to be when long-term rates are relatively high and short-term rates are relatively low. So we'll talk a little bit about how that can happen. And the yield curve has everything to do with that. yield curve, as you know, we've talked about it being very flat since COVID. That's one reason why arms are not super popular right now, but they're starting to gain some steam.

I think that there's this thought that long-term rates are likely going to be higher for longer. But if we do see some movement from the Fed, or even if we see just some more recessionary type of environment, like starting to develop, that you could get shorter term rates that are quite a bit lower, where long-term rates could remain high stubbornly. So anyway, we're going to get into what is an arm in very simple terms. And we'll start right now. An arm is an adjustable rate mortgage.

literally what the acronym stands for and most arms are going to be for a period of time. So that could be three to 10 years typically. I'd call it five on average. A five-year arm is a pretty popular flavor. You could have a seven-year arm as well. And they could be conforming loans, they could be government loans. There's also non-agency, which in this market that's forming right now, there could be a pretty good...

for liquidity in non-agency arms. But anyway, an adjustable rate tends to be, it's probably still going to be a 30-year loan, but you'll just have this fixed period, three, four, or three, five, seven years. And then after that, the loan is going to adjust, right? So you could still continue paying for the next 25 years, but that rate is going to adjust every six months to a year based on an underlying index and a margin basically. ⁓

e adjusting back in the early: 2000

Those events typically went by too much drama because as these arms did index, they didn't end up rising significantly or payments didn't end up doubling or tripling as some had worried. Because even if you had an arm today that indexed today, meaning you passed your period of five years and this was year six, you'd have a rate of six and a half, 6.7 ish, which kind of puts you right in the realm of what a fixed rate 30 year would be today.

Anyway, that's kind of the simple math on how the indexing works. getting into just some of the affordability, some of the economics to the borrower, right? Why would I want an arm? Why would I want this less certainty that I'm going to have this interest rate for a long period of time? And it's payment. It has to make sense to the borrower. The payment has to be significantly lower than what it is on a 30 year. what could that look like

arms were fairly popular. So: 2018

That would be a difference of about $300. So fixed rate would be about 2,600 and an arm would be about 2,300. So it's significant amount that could cover in some cases your insurance or your taxes. it made sense again that we had a decent amount of arms being originated in that market, but that took a whole hundred basis points on 400,000 just to get that payment down by a few hundred bucks, if we go a little further back, go to like 05.

Right? This is when arms were screaming. Obviously there's a lot going on back then pre financial crisis, but there was, you know, call it two and a half points difference between a 30 year fixed and an arm. So 30 year fixed was about 6 % back then an arm you could get at like three and a half. And that, then you're really smoking, right? Then you're talking about the difference between like a $3,000 payment and a $2,200 payments at $800 difference, almost a thousand bucks a month. It's a really big difference there.

It's hard to say where we're going to land in this market, we do have fixed rates higher than both of those numbers I just mentioned in 18 and 05. We're in the six and three quarters range right now with all these upward pressures that we've talked about from to military spending to US deficits to all that. The long-term outlook for interest rates does seem to again be

fairly high, arms could kind of come in to save the day potentially. If you can get something, you know, forward six and three quarters and we start seeing arms in the fours, you're talking about a major difference in affordability. And, you know, and even from there, what we're starting to see already with like government arms, for instance, is buy downs. You know, you can get a bit more bang for your buck by permanently buying down a rate on an arm than you can on a third year. So you start to bring that into the economics then.

Then the arguments towards the Fed, somehow being responsible for the affordability crisis, but also having some power to give some relief in the territory of arms, there may actually be some truth to that. If the Fed does drop rates here in the second half of the year, seems unlikely that long term 30 year rates will drop with that number, but arms could. If you start to see the curve tilt downwards because shorter term rates are getting cheaper.

Whereas longer terms kind of stay pegged in that to 7 % range.

then, yeah, I mentioned it earlier, but I think there's a stigma on arms that is probably not deserved. Some of that stigma was just around subprime and all day and all these other kind of bogeyman type names that caused the great financial crisis. But it was not the fact that these were adjustable rate mortgages that we had the crisis. It was a credit crisis, right? It had to do with people borrowing more than they should have, borrowing more than they should have been eligible for.

getting into certain types of arms that were not very well explained to people, like arms that were negatively amortized or arms low teaser rates and very high effective rates. So we'll put those aside. Those don't really exist anymore. You may or may not be aware of that. Like now we're back to these traditional arms, right? Where you have, again, you have a fixed period, five, seven, 10 years, and then you adjust to SOFR, which again is like about 4.3%. You add your two and a quarter on top of that.

So again, even if you were to index on an arm today, you'd be at six and a half, six and three quarters. So it might be a little bit of an increase from your teaser rate, you know, maybe in the today, probably high But you know, even if rates went to 10%, like that's maybe where you start to see a a nasty adjustment on an arm. If you started at four or 5 % and you go up to, you know, 12, could be a bit difficult for a borrower to adjust to.

But there's also caps. So you've heard folks talk about caps on arms. So those are adjustment caps basically. So each year and then over the whole life of the loan, there's only a certain amount that the arm can index that the arm can adjust up. Those are typically like two to 3 % a year. So you cannot index, you cannot adjust higher than two to two or 3 % above your initial rate each year. And then there's usually an overall cap of five or 6%. So again, back to like the 4%, 5 % teaser rate.

you still would not break 10 % on your indexed rate once it adjusted that period of time. yeah, it used to be part of a strategy for a lot of borrowers where they would, every five to seven years, they would refinance into whatever current rates are. And those rates on those arms would typically be lower than what you get on a fixed rate.

Kevin Foley (: 21:39

Yeah, Jim, think the big point standing out to me is just that these types of loans that are appropriate for in a variety of different situations. a lot of the, call it excesses of the past have really gone away. of potential need out there if you're thinking of staying in your home only for

you know, five to seven years and just looking for a rate to accommodate you before you decide to, you know, either buy a new home or, you know, maybe you have future plants to, you move, just move somewhere else. so kind of demystifying the arms as, an instrument and talking about their applicability in the current market, I think is important.

Jim (: 22:24

Oh, good call. It's been a long time. That's why we're here, just reeducating ourselves So Kevin, I think you did a little bit of research. I mentioned earlier very unique that we have a 30-year fixed loan in our country. I think you looked around at some other countries and what kind of what their loans look like. And while 25 to 30 years is a pretty common term, fixed versus adjustable, there's a

an imbalance there, if you will, compared to the US.

Kevin Foley (: 22:48

Yeah.

Yeah. So the US is really unique in the way that mortgages are structured, primarily offering a fixed rate, 30 year fixed rate at that. And then also on top of that, no prepayment penalty and the optionality to refinance whenever rates decrease. That's really unique to the US.

A lot of people have worked in the industry for a while, but may not realize how unique that actually is compared to looking at other countries and not just, countries in different places or, let's say, non-developed countries. We're talking about Canada, the UK, Australia. So just taking a look at our English speaking, developed nation counterparts, things that you can expect to find if you go to apply for a mortgage.

those countries. So Canada, ⁓ typical fixed term is going to be only five years. So the full term would be 25 to 30 years. then prepayments are usually a lot, but with some penalties. So generally speaking, what you have is your five-year fixed term, and then you're going to continually refi, generally speaking, at the next kind of current market five-year fixed term, or just choose to take that floating.

Same thing is true for the UK, even shorter two to five years on average. Australia, very similar, one to five years on average for their initial fixed term. then mortgages go to a floating sort of arrangement, or you just refi, you either work with your existing lender or new lender and then just refi at the current term. in a way it's sort of unique

So do a little compare and contrast with the US. So obviously I think the US's mortgage terms of the 30-year fixed rates, your ability to refi the no prepayment penalties, that's very borrower friendly. It's not quite as borrower friendly in places like Canada, the UK, and Australia. But the flip side of that is, for those countries when their central banks need to raise interest rates,

those end up having a direct impact on consumer finances. Whereas in our country, and that can help explain some of why we've been in this situation for so long with a higher interest rate environment. There's a lot of people out there who refied during COVID who are just not feeling it. Because got a 2 % rate, they might've taken their rate out when it was 4%, they refied down to

Jim (: 25:02

Mm-hmm.

Kevin Foley (: 25:27

high twos or lower threes, their houses increase in value, they're really not feeling the crunch. sort of created this, you know, haves and the have nots in terms of had access to those fixed rates at that time. Whereas there's in Canada, UK, Australia, there's going to be more of a broad base impact of changes in the central banks setting of interest rates. So you kind of have, you know, sides of the coin there.

Jim (: 25:52

Rosen

Collins, yeah.

Kevin Foley (: 25:53

Yeah,

exactly. You can have very borrower friendly terms, but that does come with a catch where if you're trying to control inflationary environment, it can become much harder from a central banking perspective.

Jim (: 26:05

Yeah, again, very unique. know, I've heard some advocates of our industry say, you know, especially with volume where it's been the last couple of years and, you know, we, as participants in the market, we've kind of been, you know, give etching, if you will, about how, where's the volume? This is, you know, we need arms, we need these other new products. And some people would say, are you nuts? Like we have a 30 year fixed rate loan that's backed by the federal government. Like that's an amazing.

opportunity that any other country would love to have, like just go out and sell it. ⁓

Kevin Foley (: 26:36

Yeah, yeah, for

sure. And I think the overarching takeaway here, there's really two, which is one is we have very, very borrower friendly terms with our third year fixed rate. But the second point is it's really not in it's sort of coming back to your original point, Jim, of demystifying arms. These really aren't

they're actually very commonly used in other developed of the ones that I went through here. definitely an important thing to be thinking about if you're a lender to have in sort of your product repertoire, if you that you're able to go out there and offer because there really are important scenarios in arms are important.

Jim (: 27:20

yeah, let's talk a little bit. Alex, you've got a good take on this. I mean, what would it take right now? Like hypothetical rate move scenarios. What could we be seeing in these next few years in terms of favorable market conditions for an arm?

Alex Hebner (: 27:34

Yeah, I think, I mean, what makes arm so attractive is a steep yield curve, know, longer term, which is where your fixed rate mortgages are generally being based off of when that's higher. if you can lock in somewhere on the short shorter end of the curve, maybe like a five year for, you know, a five one arm or something like that. know, that that's really attractive and that's kind of what's driving the, the current, push for, for, for more arm products that we're seeing.

you know, that they're a hot topic because, you know, fixed rates are becoming unaffordable in this environment. Kevin kind of talked about, you know, all these people that are sitting on extremely low mortgage rates, they have a really low propensity to, to, to turn over their, their mortgage and the house in and for a lot of markets in America, you know, turnover is not the only aspect of that market, but it's, it drives a lot of the volume that, that shops might see in, in particular locales. and so, and so arms are kind of designed or, know,

in this specific scenario great for increasing that turnover and bringing new borrowers into the market. Those that again, can't really afford a fixed rate mortgage in Looking at kind of the different rate paths moving forward, arms are kind of sold on the premise of a lower initial rate and then a dovish outlook beyond that fixed period. If you're someone who's only planning to stay in a home for five or seven years, an arm is probably great because you can lock in something that's much lower than a 30 year rate for today.

now, as we're looking towards: 2026

You know, a decent clip of rate cuts. know, like one rate cut alone doesn't sustain the selling point, arms, but I think, you know, if we see two or three rate cuts, I think, you know, we'll see that fixed product come back into Vogue just because everyone that's gotten themselves into a call it like a six and a half or more mortgage fixed rate in the past two, three years is now going to have a propensity to refi. And again, there's just all these marginal buyers as you keep going down the yield curve.

at six and an eighth, at six percent, five and seven eighths, all these folks, there's no lack of people that want to get themselves into a home.

Jim (: 29:56

They'll have more options, presumably if the curve is steeper. We may get lower long-term rates, but the shorter end of the curve is really going be where people pick up on the affordability scale, where you can get hopefully a five or seven year loan with 150 basis points at least less than what a 30 year goes for.

Alex Hebner (: 30:18

Right. As you were talking about, when you're breaking down the cost of an arm, know, you've taken SOFR and then adding on, you know, you know, some, some risk factor onto that. so, so the lower end SOFR is based on the shorter end of the curve. and as SOFR comes down, you'll also see those arm rates come down as well. and, as we've talked on the podcast multiple times, you know, there, there does seem to be a lot of uncertainty in regards to the longer term into the curve. When we're talking about those 10 and 30 year auctions for us treasuries, you know, people are calling into question, you know,

what's going to be the value of those dollars as they come through as cash flows, you know, in eight or nine years. And so that's where lot of the uncertainty is regards to longer term rates. And plus that's where they're adding more bips onto that end of the curve.

Jim (: 30:59

All right. I think I feel better educated and kind of back to where I was a few years ago in terms of my understanding of arms. I don't know if we answered Kevin's initial question of do arms have legs in this market. think it'll a lot of it will depend on what short term rates do here in the short term. Do we see cuts from the Fed taking their foot off the brake pedal? And then when we do see that do

long-term rates stay high. I think generally the outlook, if you ask economists right now, we often look at the NBA, look at Fannie, Wells Fargo does some rate projections. Those projections are pretty high for 30-year fixed for quite a long time. But you look at the CME and the money is betting on multiple rate cuts still this year. And then if we do start to see this recession, this shoe that drops, we may see

Short-term rates go even lower and therefore we have a good, that's where arms would have legs in this market is that curve steepening.

Alex Hebner (: 32:04

You

Kevin Foley (: 32:07

There we go, there's our answer.

Jim (: 32:09

Yeah, I've sandbagged it as well as I can, you know.

Kevin Foley (: 32:12

Hahaha.

Alex Hebner (: 32:13

Ha ha.

Jim (: 32:15

Alright, anything else on arms, gentlemen?

Very good. Thank you very much. Thanks everybody.

Kevin Foley (: 32:17

That's a wrap.

Alex Hebner (: 32:21

Thank you.

Kevin Foley (: 32:21

Thanks.

Jim (: 32:22

All right, let's wrap this thing up. Good show everybody. Thank you, Alex. Thank you, Jeff. Thank you, Kevin. Great discussion today. And that's it. Join us next week for another episode of Optimal Insights, where we'll continue to provide you with the latest market analysis and insights to help you stay ahead. Check out our full videos on YouTube. You can also find each episode on all major podcast platforms. Thanks again for tuning into Optimal Insights.