The Daily Tearsheet

Stocks are lower as oil rises. Bonds and MBS are down.

President Trump wrapped up his visit with China yesterday. China wants “strategic” stability – “‘Strategic stability’ from strategic rivalry is a major shift,” said Henry Wang, founder and president of the Beijing-based Center for China and Globalization. “We are moving to a new normal. This summit was an inflection point after a tough relationship that began with the start of Trump.”

The public statements on Iran were sparse, but since China gets a lot of oil from Iran the situation had to weigh heavily in the background. China is looking for rhetorical shifts in the US’s stance against Taiwan.

Retail sales rose 0.5% last month, which was in line with expectations. Auto sales were a drag. Excluding vehicles, retail sales rose 0.7%. Sales overall were up 4.9% on a YOY basis. Census doesn’t adjust these numbers for inflation, so retail sales were up modestly on a real basis.

Stephen Miran has resigned from the Federal Reserve Board as Kevin Warsh takes over. Miran has been a consistent dovish voice, advocating for much lower rates.

The bidding war for Two Harbors continues, as United Wholesale launched a $12.50 cash tender offer for TWO. The Two Harbors Board rejects the offer, and advises shareholders to accept the Cross Country Mortgage offer. Cross Country has sort of sweetened the terms of its offer, giving TWO shareholders a prorated dividend in the quarter the deal closes, upping the consideration to $12.45 – $12.68. TWO is currently trading around $12.60 per share.

Mortgage delinquencies increased in the first quarter, according to the MBA. DQ rates rose to 4.44%, which was up 40 bps compared to a year ago. Much of this was driven by FHA loans.

“Mortgage delinquencies increased on an annual basis, with conventional loan delinquencies relatively flat but with notable increases among FHA and VA loans,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Last quarter, the delinquency rate for FHA loans was about 900 basis points higher than the conventional delinquency rate, and the VA delinquency rate was almost 225 basis points higher than the conventional delinquency rate. These are the widest spreads since 2021.”

Added Walsh, “We also saw movement of some delinquent FHA and VA loans into later stages of delinquency and into foreclosure. While the overall foreclosure rate remains well below historical averages, the first quarter’s foreclosure inventory rate for FHA loans reached its highest level since the fourth quarter of 2018, and the foreclosure rate for VA loans reached the highest level since the second quarter of 2017.”

MCT made its first AI TBA trade. “When we demonstrated the Hedge Recommendation Agent at MBA Secondary last year, we said AI execution was coming,” said Phil Rasori, COO at MCT. “The Trade Execution Agent is that reality. What we’ve built is a system that understands a pipeline, determines what action is warranted, and can complete that action responsibly. This is what MCT’s AI arc has always been building toward: making mortgage secondary marketers dramatically more efficient and their operations more competitive.”

Stocks are higher this morning as Trump meets in China with Xi Jinping. Bonds and MBS are up small.

Kevin Warsh was confirmed as the next Fed Chairman 54-45 on a party-line vote. Fed Chairman votes are usually pretty bipartisan affairs so this is unusual. Jerome Powell said he will stay on as a governor until the DOJ investigation is completed.

“The Senate’s confirmation of Kevin Warsh as the next Chairman of the Federal Reserve is a welcome step towards finally restoring accountability, competence, and confidence in Fed decision-making,” said White House spokesman Kush Desai.

Warsh is considered more dovish than Powell was, but after the recent CPI and PPI prints I think we can stick a fork in rate cuts for the rest of the year. The December Fed Funds futures are handicapping a tiny chance for any cuts

Minneapolis Fed President Neel Kashkari sounded hawkish in a speech yesterday. The situation in Iran has “upended” the inflation environment, with inflation having been “too high” for the past 5 years. The Strait of Hormuz closure is boosting fertilizer prices which will raise food prices. It isn’t just about energy.

Kashkari also poured cold water on the idea that the Fed might accept a higher level of inflation, say 3% to acknowledge the new reality. “We need to get back to 2% because we need to let people know that we’re not going to move the goalposts.” Kashkari characterized the labor market as “lukewarm” but “hanging in there.”

FWIW, the 2% inflation target is a pretty recent phenomenon. It was introduced in 2012, when the enemy was deflation, not inflation. It was intended to send a message to consumers that the Fed would not permit deflation, which was intended to get consumers spending. The US was still fighting a deflationary spiral after the burst real estate bubble in 2008.

If you look at inflation over the years, we have spend most of our time well above 2%. Generally speaking it took some sort of crisis to get inflation back to 2%. In the late 80s, it was the stock market crash. In the late 90s, it was the Asian Crisis. In 2002, it was the combination of the burst stock market bubble and 9/11. In 2009 – 2011 it was the burst real estate bubble, and in 2000 it was COVID. I am not sure what the catalyst was in 2015.

Inflation averaged above 3% in the 1990s and I think most people remember that period as a pretty comfortable time economically. My point is there is no magic in the 2% inflation target, and it was put in place to fight deflation not inflation. Will consumers and employees change their behavior if the Fed moves the target from 2% to 3%. Perhaps, but I doubt it.

Eris Future’s Geoffrey Sharp sat down with the Chrisman Podcast to discuss how mortgage bankers can hedge non-QM loans.

Stocks are higher despite a hotter than expected PPI print. Bonds and MBS are down.

The Producer Price Index rose 1.4% in April, which was well above the March increase of 0.7% and the consensus estimate of 0.5%. On a year-over-year basis, prices rose 6%, the biggest increase since 2022. If you strip out food, energy and trade services, wholesale inflation rose 0.6% MOM and 4.4% YOY. Higher energy prices were at the root of the issue, but we also saw big increases in the prices for machinery and equipment. Trucking and warehousing also rose.

Between the CPI yesterday and the PPI today, the Fed Funds futures don’t see rate cuts in the cards anymore this year.

Mortgage applications rose 1.7% last week as purchases rose 4% and refis fell 1%. “Mortgage rates were generally higher last week, with the 30-year fixed rate at 6.46%, its highest level in five weeks,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were higher over the week and 7% ahead of last year’s pace, with all loan types showing increases in purchase activity, as potential homebuyers shrugged off the current economic and mortgage rate uncertainties and returned to the market. Refinance applications declined slightly, led by conventional and VA refinancings, and accounted for a little more than 40% of applications last week, the lowest share since July 2025.”

Chicago Fed President Austan Goolsbee discussed how inflation remains a problem. “There’s a 2% target. We’re well above 2%, and we’ve been above 2% for many years,” Goolsbee said. “We stopped making progress last year, and now in the short run it’s getting a little worse. So I think it was close to what was expected. But what was expected isn’t that favorable. We’ve got to deal with this affordability issue.”

Stocks are lower this morning after the inflation numbers came in as expected. Bonds and MBS are down.

First of all, apologies for no Morning Report on Friday and Monday. I was on the road and my laptop was having issues.

The week ahead will be dominated by inflation data, with the consumer price index today and the producer price index tomorrow. We will also hear from Neel Kashkari, Austan Goolsbee and Beth Hammack amongst others. Hammack and Kashkari dissented at the April meeting over the easing bias and it will be interesting to hear more about it.

Consumer inflation rose 0.6% MOM and 3.8% YOY, while the core rate rose 0.4% MOM and 2.8% YOY. The headline number moderated from March’s 0.9% increase. Higher energy prices drove the jump. Interestingly, the index for shelter jumped from 0.3% to 0.6%. We saw home price inflation rebound in the Clear Capital Home Data Index in the same month, so perhaps home prices are rebounding. This will be something to watch. Used car prices fell.

The headline number was in line with expectations, while the core rate came in slightly hot.

Existing home sales rose 0.2% MOM in April, according to the NAR. “Despite mixed macroeconomic signals—including a record-high stock market and historically low consumer confidence—home sales were modestly boosted by the continued improvement in housing affordability,” said NAR Chief Economist Dr. Lawrence Yun. “Mortgage rates are lower from a year ago, and average income growth is outpacing home price gains.”

“Inventory still remains tight,” Yun added. “Multiple offers, though not as intense as a few years ago, are still occurring. At the same time, days on market are lengthening on average, implying that consumers are taking their time before making decisions.”

“The increase in second-home purchases reflects stronger finances among higher-income households, as well as the post-COVID rise in remote work and hybrid job schedules.”

There were 1.47 million units for sale at the end of the month, which represents a 4.4 month supply. The median home price rose 0.9% YOY to $417,700.

Problems continue in the private credit space. FS KKR Capital, a KKR-sponsored private credit fund reported a big drop in NAV, and KKR is injecting $300 million into the fund to stem losses.

Small Business Optimism barely budged in April, according to the NFIB. The uncertainty index declined, although it did it the wrong way – by businesses determining it is not a good time to expand. The employment index fell, as did capital expenditures. Inflation rose.

Economic growth picked up in the first quarter, posting 2% growth
after less than 1% in the fourth quarter of 2025. The driver was capital spending, as AI investments surged. Government spending added a little oomph; consumers stayed in the weeds. Job creation was a bit better, but the unemployment rate stayed the same. Powell conducted his last meeting as Fed chair. President Trump wants the new chair to cut interest rates, but the rest of the Federal Open Market Committee is unlikely to comply. Indeed, some on the Fed Board favor a rate increase to prevent the AI spending and higher energy prices from pushing inflation higher. This is a tough balancing act.

In April, when more small business owners reported paying higher interest rates on their loans, the market raised those rates, not the Fed. The frequency of price increases for goods and services also rose, adding more to inflationary pressures. The percent making capital outlays is down nine percentage points so far this year; there doesn’t appear to be an AI investment surge on Main Street. With the April 15 Tax Day behind us, the benefits of the OBBB should start to feed into the private sector, and perhaps capital spending will respond later in the year as owners sort out the actual changes in the bill. Corporate profits are booming and the stock markets are hitting records, so hopefully Main Street will follow. But consumers have been “quiet”; sales are lagging, and hiring is weak. Consumer and Small Business Optimism are weak. Many uncertainties remain unresolved, but this process will likely get underway over the next few months.

Stocks are higher this morning on continued optimism for a deal with Iran. Bonds and MBS are up.

Home prices rose 0.6% on a quarterly basis and 1.9% on an annual basis according to the Clear Capital Home Data Index. The quarterly number rebounded from a decline in March and indicates that the real estate market could be rebounding. The hip to be square trade continues, with the Northeast and Midwest seeing the fastest growth while the South and West lag. The top spots for growth were Rochester NY, Providence RI and Birmingham.

The private sector added 109,000 jobs in April according to the ADP Employment Survey. This was above the 85,000 consensus estimate and the 63,000 estimate for Friday’s jobs report. “Small and large employers are hiring, but we’re seeing softness in the middle,” said Dr. Nela Richardson, chief economist, ADP. “Large companies have resources to deploy, and small ones are the most nimble, both important advantages in a complex labor environment.”

Education / health services added 61,000 jobs while trade / transportation and utilities added 25,000. Professional / business services lost 8,000. Pay growth for job stayers moderated to 4.4%. Pay growth for job changers came in at 6.6%.

UWM reported earnings of $0.08 per share for the fourth quarter and $0.12 for the full year. Origination volume rose 28% YOY to $49.6 billion. Gain on sale margins rose to 122 basis points. UWM is bringing servicing in-house for cost and recapture reasons and launched a tender offer for Two Harbors. CEO Mat Ishbia is optimistic about the market in general: We’re very optimistic on the mortgage and housing industry. There’s a big tailwind behind all of us. A lot of it’s tied to the market, but the administration HUD, FHFA, Treasury, all these leaders in the country and in our industry are trying to find a way to help affordability and lowering rates to help more consumers.” The conference call was brief and the company took no questions from the Street.

Announced job cuts rose 38% in April according to the Challenger and Gray Job Cut report. “Technology companies continue to announce large-scale cuts and are leading all industries in layoff announcements. They are also often citing AI spend and innovation. Regardless of whether individual jobs are being replaced by AI, the money for those roles is,” said Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas.

Stocks are higher this morning on optimism for a resolution in the Persian Gulf. Bonds and MBS are up.

Trump posted on Truth Social last night that he was pausing “Operation Freedom” which would use US Navy vessels to escort shipping through the Strait of Hormuz, citing “great progress” on a deal. Apparently the two sides are close on a 1 page, 14 bullet point memorandum of understanding which would re-open the Strait.

New home sales rose 7.4% MOM and 3.8% YOY to a seasonally adjusted annual rate of 682,000 units. Housing inventory was 481,000, which represents a 8.5 month supply at current levels. Buyers have the upper hand in the new home market, which was confirmed in the numbers reported by the homebuilders.

The median sales price fell 6.2% YOY to $387,400. This is below the median existing home sale price of $408,800. First time homebuyers might want to take a look at new homes. Especially if the builder can give you a 5% mortgage.

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PennyMac reported originations of $37 billion in the first quarter, an increase of 28% on a YOY basis. Gain on sale margins increased to 86 basis points from 68 bps the year before.

Job openings fell to 6.88 million in March, according to BLS. Openings in professional and business services fell 318k, however hiring increased in that sector. The quits rate increased to 2% after falling briefly to 1.9% in February.

Mortgage applications fell 4.4% last week as purchases fell 4% and refis fell 5%. “The ongoing conflict in the Middle East continues to push rates higher. Mortgage rates last week increased to their highest level in a month, with the 30-year fixed rate rising to 6.45%,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As expected, elevated rates and shrinking refinance incentives continued to weigh on activity, with refinance applications declining again from the prior week – most notably for conventional and VA loans. The refinance share of applications was the lowest since August 2025.”

Stocks are higher this morning as earnings continue to come in. Bonds and MBS are up small.

The UAE reported that it intercepted some Iranian missiles, which means the ceasefire is probably running on fumes at this point. Iran is also making noise about having “not begun yet” to close the Strait of Hormuz. So far the Trump administration has stopped short of saying the ceasefire is over but it appears hostilities will begin again.

The Fed Funds futures took Neel Kashkari’s piece seriously about the potential for rate hikes. The December futures now see a nearly 30% chance for rate hikes this year and only a 6% chance of a rate cut.

NY Fed President John Williams made numerous references to 5/4 as Star Wars Day yesterday in his speech “There Is No Try.”

Right now, the future is difficult to see, and the risks to both sides of our mandate have increased. The extent and duration of the effects of supply disruptions and higher energy prices that are emanating from the Middle East conflict are key factors that will shape the global economic outlook. We simply can’t know how this will play out. Market expectations of the future path of oil prices are fairly benign, but several plausible scenarios entail more severe dislocations in both prices and quantities.

Because the global economy is highly integrated, the emerging supply-chain issues will have wide-ranging consequences. For example, Asian countries that play a key role in the supply of high-tech equipment are particularly exposed to shortages of various commodities. Thus, the conflict could result in a larger and broader-based supply shock that has more severe adverse consequences for inflation and economic activity.

To paraphrase our Jedi master, “Much to learn we still have.”

Interestingly he expects the pass-through of tariffs to current prices will be played out in the next few months. He did not appear to reference the fact that they will expire across the board in about 5 weeks. This means that not only will the price hikes be finished, but prices will begin to decline as tariffs disappear. It sounds like the absence of tariffs is not being factored in here. Not sure why.

Remember Gamestop, the short squeeze darling of the COVID years that was on death’s doorstep? They put out a bear hug letter for Ebay, valuing the much larger company at $56 billion or $125 a share in cash and stock. Gamestop has $9 billion in cash and a “highly confident” letter from TD Bank that it can raise the rest. Note that banks don’t put out “highly confident” letters if they are highly confident they can do the deal. They make a commitment.

Gamestop has a market cap of $10.6 billion and has $4 billion in zero coupon debt. It seems to be in the crypto trading business as well, with a side hustle as a video game retailer. Ebay stock is trading at a big discount to the $125 bid so it is clear no one takes it seriously. Gamestop stock got hammered yesterday, falling 10%.

Gamestop has been buying Ebay stock already, so the goal is put Ebay in play, hopefully smoke out a real buyer, flip the stock it owns and move on to something else. Gamestop CEO Ryan Cohen, who draws no salary and is compensated solely on Gamestock’s stock performance is trying to turn the company around, and has had some success.

This one will be fun to watch.

Stocks are lower this morning as the Iranian situation continues to drag on. Bonds and MBS are down.

The US will guide stranded ships through the Strait of Hormuz. “Countries from all over the World…have asked the United States if we could help free up their Ships, which are locked up in the Strait of Hormuz,” Trump wrote on Truth Social on Sunday. “For the good of Iran, the Middle East, and the United States, we have told these Countries that we will guide their Ships safely out of these restricted Waterways, so that they can freely and ably get on with their business.”

The week ahead will be dominated by the jobs report on Friday. We will also get new home sales, ISM Services, construction spending and consumer sentiment. We will get earnings from PennyMac, Zillow, Blue Owl Technology and United Wholesale.

The manufacturing economy continued to expand in April according to the ISM Manufacturing Report. New orders rebounded after four months of contraction, while production decreased. Prices jumped again, with the prices index at the highest levels since 2022 when inflation was peaking. “In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before. Of the five subindexes that make up the PMI^®, the New Orders and Supplier Deliveries indexes indicated faster growth compared to the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction.

“In this second month of the Iran War (at the time of data collection), 31 percent of the comments were positive and 69 percent negative, with a positive to negative sentiment ratio of 1 to 2.2. Among comments, the war was mentioned in 47 percent and tariffs in 18 percent. As was the case last month, some panelists referenced both topics within a single comment or in mixed sentiment.

In the FOMC decision last week, Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time. The dissent was interesting because there wasn’t any clear language in the statement that talked about an easing bias in the first place. It seemed the Fed was looking at both sides of the dual mandate.

Neel Kashkari explained his dissent here. “I supported the Federal Open Market Committee’s (FOMC) decision to hold the federal funds rate at this week’s meeting,¹ but I dissented against the FOMC’s action because I did not think it was appropriate to continue to include the following phrase in the policy statement: “In considering the extent and timing of additional adjustments to the target range for the federal funds rate …”

While that phrase is not a commitment to make further cuts to the policy rate, it is widely interpreted by Fed watchers to indicate the Committee’s expectation that the next adjustment to the federal funds rate would be a cut. I consider this language a form of forward guidance about the likely direction for monetary policy.”

The bias of the Fed had been towards easing in the past, simply because the Fed Funds rate was above the neutral rate of interest and inflation was falling. I don’t think the statement itself was driving it – the facts on the ground were. That said, I think Neel wanted a brushback pitch to the markets not to assume that rates are going to be falling in the future, and this was a way to do that.

He wraps up the piece with this: “Given the uncertainty about the path of the conflict and the resulting effects on inflation, employment and economic growth, I believe the FOMC should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves. This could tighten financial conditions somewhat today, pushing back against a high-inflation scenario that could require an even stronger monetary policy response in the future.”

Stocks are up this morning after good numbers out of Apple. Bonds and MBS are up small.

Personal incomes rose 0.6% MOM in March, while spending rose 0.9%. Disposable personal income rose 0.6%. The PCE Price Index, which is the Fed’s preferred measure of inflation rose 0.7% MOM and 3.5% YOY. If you strip out food and energy, the index rose 0.3% MOM and 3.2% YOY.

Inflation has been in a gentle upward trend since last last year, and the Iran war really accelerated the trend, especially in the headline number.

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Interest rate volatility can spike at any time. Think of the past catalysts: COVID, Brexit, 2008. When volatility spikes, MBS spreads widen and your gain on sale decrease. One way to hedge that risk is to use options, which increase in value when volatility spikes. 

Many mortgage bankers have tried TBA options, but these require a dedicated counterparty and are illiquid. The Chicago Mercantile Exchange is now listing options on SOFR swap futures, which correlate well with mortgages, especially non-QM. Talk to ERIS about using margin-friendly SOFR Swap futures and options to hedge tail risk in your portfolio. 

The CME put out the following press release on April 14^th.

CME Group, the world’s leading derivatives marketplace, today announced it will launch options on Eris SOFR Swap futures on June 16, 2026, pending regulatory review. SOFR futures are a liquid way to manage interest rate risk. “Eris SOFR Swap options will help institutional investors manage risk with greater precision as they navigate varying expectations on the direction of U.S. interest rates,” said Michael Riddle, CEO of Eris Innovations. “By mirroring the structure of forward-premium OTC swaptions, Eris SOFR Swap options can deliver cost optimization, margin efficiencies and trading simplicity amid shifting economic conditions.”

Eris SOFR Swap futures replicate interest rate swap cash flows, offering the standardization and capital savings of exchange-traded instruments. The addition of options on 2-year, 5-year and 10-year Eris SOFR Swap futures will support more sophisticated hedging strategies, such as managing non-linear risk in mortgage-backed portfolios.

Since launching in October 2020, more than 10 million Eris SOFR Swap futures contracts have traded at CME Group. In March 2026, Eris SOFR Swap futures reached an all-time open interest record of 707,000 contracts ($71B notional), including a single-day volume record of 299,513 contracts on March 10.

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First quarter GDP rose 2%, which was an improvement from the fourth quarter of 2025. Investment and exports drove the increase. The PCE Price Index rose 4.5% annualized in the quarter which was a big jump from Q4’s 2.9%. All of the inflation indicators are going the wrong way and it looks like we can forget about rate cuts this year.

The business press is already pushing the stagflation narrative, which is ridiculous in the context of 2% growth and 3.5% inflation and basically amounts to wishcasting. The best indicator for stagflation is the misery index, popularized in the 1970s which sums inflation and unemployment. We are on the low side of that measure historically:

The index of Leading Economic Indicators declined in March, according to the Conference Board. “After rising in February, the US LEI pulled back sharply in March, as building permits declined and consumer expectations and stock prices weakened,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “The LEI continues to signal a slowdown in the economy over the coming months, as higher oil prices and supply chain tensions will likely place additional upward pressure on inflation and further reduce consumers’ purchasing power. The labor market, while currently stable, may soften with hiring slowing and unemployment edging higher. Growth will likely remain modest, as weaker consumer spending offsets some strength in business investment and defense-related activity. The Conference Board revised its US GDP growth forecast to well below 2%, down to 1.6% y/y for 2026.”

FWIW, the Atlanta Fed GDP Now model sees 3.7% growth in Q2, which is pretty robust.

Stocks are higher this morning after the Fed maintained rates at current levels. Bonds and MBS are down due to a lack of progress in the Persian Gulf.

As expected, the Fed maintained the Fed Funds rate at current levels. The language was pretty much the same language the Fed has been using. As expected Stephen Miran dissented, preferring to cut interest rates. There were three other dissenters: Hammack, Kashkari and Logan who objected to the inclusion of “easing bias” language in the statement. FWIW, the statement consistently refers to both sides of the mandate, so I am not sure what they are objecting to. Yes, there has been the perception that they are leaning towards easing (if only because monetary policy is tight in the first place) but the language in the FOMC statements for a long time has referred to both sides of the mandate.

Bonds, which had been weak all day sold off further. The December Fed Funds futures still forecast no further changes to monetary policy this year, but the chance of a hike is now larger than the chance of a cut.

Jerome Powell has stated that he won’t leave the Fed until the issue of the renovation is resolved. Trump suspended the DOJ’s investigation in order to get Kevin Warsh confirmed, but that apparently isn’t good enough. Powell will remain as a Governor and will let Warsh run the show.

March housing starts rose 11% MOM and YOY to a seasonally adjusted annual rate of 1.5 million units. Feb starts came in at 1.3 million. Building permits were down.

________________________________________

Interest rate volatility can spike at any time. Think of the past catalysts: COVID, Brexit, 2008. When volatility spikes, MBS spreads widen and your gain on sale decrease. One way to hedge that risk is to use options, which increase in value when volatility spikes. 

Many mortgage bankers have tried TBA options, but these require a dedicated counterparty and are illiquid. The Chicago Mercantile Exchange is now listing options on SOFR swap futures, which correlate well with mortgages, especially non-QM. Talk to ERIS about using margin-friendly SOFR Swap futures and options to hedge tail risk in your portfolio. 

The CME put out the following press release on April 14^th.

CME Group, the world’s leading derivatives marketplace, today announced it will launch options on Eris SOFR Swap futures on June 16, 2026, pending regulatory review. SOFR futures are a liquid way to manage interest rate risk. “Eris SOFR Swap options will help institutional investors manage risk with greater precision as they navigate varying expectations on the direction of U.S. interest rates,” said Michael Riddle, CEO of Eris Innovations. “By mirroring the structure of forward-premium OTC swaptions, Eris SOFR Swap options can deliver cost optimization, margin efficiencies and trading simplicity amid shifting economic conditions.”

Eris SOFR Swap futures replicate interest rate swap cash flows, offering the standardization and capital savings of exchange-traded instruments. The addition of options on 2-year, 5-year and 10-year Eris SOFR Swap futures will support more sophisticated hedging strategies, such as managing non-linear risk in mortgage-backed portfolios.

Since launching in October 2020, more than 10 million Eris SOFR Swap futures contracts have traded at CME Group. In March 2026, Eris SOFR Swap futures reached an all-time open interest record of 707,000 contracts ($71B notional), including a single-day volume record of 299,513 contracts on March 10.

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Durable Goods orders rose 0.8% MOM, which was better than Street forecasts. This follows a 1.2% decrease in February. Much of the increase came from defense spending. Ex-defense durable goods orders rose 0.3%.