SOFR-linked debt is vulnerable to much higher rate volatility than those referencing LIBOR. This risk was highlighted last month when surging repo rates sent SOFR briefly to a record 5.25%.

Although the non-QM portion of the non-agency market accounted for less than $10 billion in 2018, it could absorb more than $50 billion in former patch loans if it continues its current annual growth rate.

A major influx of refinance business pushed Fannie and Freddie MBS issuance to $120.25 billion in August, their biggest monthly production since January 2013.