 Investment Outlook May, 2011 JMP Securities Research Conference May 9, 2011 Exhibit 99.1 |
 1 Forward Looking Statements This presentation contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on management’s beliefs and assumptions, current expectations, estimates and projections. Such statements, including information relating to the Company’s expectations for future distributions and market conditions, are not considered historical facts and are considered forward-looking information under the federal securities laws. This information may contain words such as “believes,” “plans,” “expects,” “intends,” “estimates” or similar expressions. This information is not a guarantee of the Company’s future performance and is subject to risks, uncertainties and other important factors that could cause the Company’s actual performance or achievements to differ materially from those expressed or implied by this forward-looking information and include, without limitation, changes in the Company’s distribution policy, changes in the Company’s ability to pay distributions, changes in the market value and yield of our assets, changes in interest rates and the yield curve, net interest margin, return on equity, availability and terms of financing and hedging and various other risks and uncertainties related to our business and the economy, some of which are described in our filings with the SEC. Given these uncertainties, you should not rely on forward-looking information. The Company undertakes no obligations to update any forward-looking information, whether as a result of new information, future events or otherwise. |
 2 CYS: Overview Agency Residential Mortgage Backed Securities Currently financing lines with 32 lenders Swap agreements with 16 counterparties Company intends to distribute all or substantially all of its REIT taxable income Scaled Management Fee: 1.0% to 1.5% No Incentive Fee Kevin Grant, CEO, President, Chairman Frances Spark, CFO Pay dividends and achieve capital appreciation throughout changing interest rate and credit cycles Be the most efficient Agency REIT in the market Target Assets Objective Senior Management Focus on Cost Efficiency Ample Financing Sources Dividend Policy A Real Estate Investment Trust formed in January 2006 |
 3 Attractive Environment Likely to Persist Steep Curve Creates significant positive carry Very Low Cost of financing Significant ROE Hedge flexibility very important Fed still fighting deflation Source: Bloomberg. (1) As of May 6, 2011 Mortgage Yields Currently Attractive Par-Priced 5/1 hybrid rates now 3.06% (1) 30 Year fixed rates now 4.14% (1) 15 Year fixed rates now 3.35% (1) Hedging rates historically low May 6, 2011 May 6, 2011 5/1 Hybrid Net Interest Margin: 1/05 – 5/11 5 Year Swap vs. 1 Month LIBOR: 1/05 – 5/11 |
 4 Wide Spreads Create Good Environment Source: Bloomberg. Note: Spreads calculated as: (i) 5/1 Hybrids Index – 50/50 3-Year Swaps/LIBOR, and (ii) 5/1 Hybrids Index – 1-Month LIBOR Index. 5/1 Hybrids Hedged with Swaps: 1/05 – 5/11 CYS Investment Strategy Simple ‘Carry Trade’: Borrow Short/Lend Long May 6, 2011 Hedged Hybrids (i) Unhedged Hybrids (ii) |
 5 10 Year Treasury Note Auctions 11/98 – 4/11 Treasury Auction Volume 2 Year Treasury Note Auctions 2/00 – 4/11 3 Year Treasury Note Auctions 10/00 – 4/11 Source: Bloomberg, US Treasury 5 Year Treasury Note Auctions 2/00 – 4/11 7 Year Treasury Note Auctions 2/00 – 4/11 30 Year Treasury Note Auctions 2/00– 4/11 |
 6 Hawkish Dovish Neutral Hoenig Bullard Plosser Fisher Lacker Duke Tarullo Dudley Pianalto Kohn Kocherlakota Lockhart Evans Pianalto Yellen Rosengren Raskin Bernanke Obama Nominee Governors 2010 Voters 2011 Voters 2012 Voters Sources: Macroeconomic Advisers, LLC, Bank of America Merrill Lynch, Bloomberg, Wall Street Journal, Indiana University, Marketwatch, Thomson Reuters, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Chicago, Federal Reserve Bank of Cleveland, Maryland Consumer Rights Coalition, Boston Globe, Businessweek, Newsweek, Washington Post, CNBC. Diamond Williams Fed Board has Become More Dovish |
 7 Hawkish Dovish Neutral Other Central Banks are Waging the Inflation War Xiaochuan China Bernanke USA Shirakawa Japan Trichet EU (Outgoing) Canada Carney Australia Stevens New Zealand Bollard Draghi EU (Incoming) Tombini Brazil Subbarao India (Outgoing) Consequences: US Rates Likely To Be Lower For Longer |
 8 Source: S&P, Fiserv, and Macromarkets LLC / Haver Analytics, BLS, Challenger, Gray & Christmas U.S. Retail Gasoline Price: Regular Grade 2006 – Present % Capacity Utilization: Manufacturing 2006 – Present % Unemployment Rate 1940-present % Economic Recovery Below Normal Pace CPI-U All Items (Less Food and Energy) 2004 – Present % Change - Year to Year Total Nonfarm Private Payroll Employment 2000-present 000’s Challenger, Gray & Christmas, Inc. Job Cut Announcement Report 1990 – Present |
 9 1 9/32 represents a discount to the purchase price of the security of approximately $0.30 per month from trade date to settlement date. Source: Bloomberg 5/6/11 Economics of Forward Purchase Example: 15 yr. 3 ½% drop = 9/32 pt. per month 1 |
 10 $0.35 $0.55 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 Oct-09 Jan-10 $0.55 Apr-10 $0.60 Jul-10 $0.60 Oct-10 $0.60 Dec-10 Portfolio Composition and Results Total Agency RMBS: $8.5 million $0.60 Apr-11 1 As of 3/31/11 CYS Agency RMBS Portfolio 1 CYS Dividends: 10/09 – 4/11 |
 11 Portfolio Characteristics Par Value Fair Value Weighted Average Asset Type (in thousands) Cost/Par Fair Value/Par MTR (1) Coupon CPR (2) 15-Year Fixed Rate $4,033,535 $4,123,587 $102.21 $102.23 N/A 3.88% 11.0% 20-Year Fixed Rate 635,489 643,471 102.36 101.26 N/A 4.14% 3.9% 30-Year Fixed Rate 993,473 1,048,091 104.36 105.50 N/A 5.20% 33.2% Hybrid ARMs 2,609,512 2,674,050 102.24 102.47 62.9 3.37% 14.40% Total/Weighted Average $8,272,009 $8,489,199 $102.49 $102.63 62.9 (3) 3.90% 11.4% (1) “Months to Reset” is the number of months remaining before the fixed rate on a hybrid ARM becomes a variable rate. At the end of the fixed period, the variable rate will be determined by the margin and the pre-specified caps of the ARM. (2) CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the constant prepayment rate is an annualized version of the prior three month prepayment rate. Securities with no prepayment history are excluded from this calculation. (3) Weighted average months to reset of our Hybrid ARM portfolio. * As of 3/31/11 CYS Portfolio Characteristics* |
 12 History of Transparent and Consistent Financial Reporting CYS uses Financial Reporting for Investment Companies CYS financial reporting - Best in Class Schedule of investments NAVs have reflected mark-to-market accounting since inception No OCI account on balance sheet Realized and unrealized losses taken through income statement Losses expensed in period incurred |
 13 Historical Financials 3/31/2011 12/31/2010 Investment Income – Interest Income $40,980 $25,025 Total expenses 7,522 5,306 Net Investment Income 33,458 19,719 Net gain (loss) from investments 19,820 (66,125) Net gain (loss) from swap and cap contracts (1,181) 29,138 Net Income (Loss) $52,097 ($17,268) Net Income (Loss) Per Common Share (diluted) $0.74 ($0.38) Distributions per Common Share $0.60 $0.60 Core Earnings (1) $21,599 $12,396 NET INCOME $52,097 (17,268) Net (gain) loss from investments (19,820) $66,125 Net (gain) loss on termination of swap contracts - $13,427 Net unrealized (appreciation) depreciation on swap and cap contracts ($10,678) ($49,888) Core Earnings $21,599 $12,396 Key Portfolio Statistics* Average Yield on Agency RMBS (2) 3.27% 3.23% Average Cost of Funds & Hedge (3) 1.44% 1.49% Interest Rate Spread Net of Hedge (4) 1.83% 1.74% Operating Expanse Ratio (5) 2.11% 2.28% Leverage Ratio (at period end) (6) 8.1:1 8.3:1 3/31/2011 12/31/2010 Cash and Cash Equivalents $6,001 $1,510 Total Assets $8,787,632 $6,389,267 Repurchase Agreements $5,364,030 $3,443,843 Net assets $969,266 $690,339 Net assets per common share $11.74 $11.59 Quarter Ended As of (1) Core Earnings is defined as net income (loss) excluding net realized gain (loss) on investments, net unrealized appreciation (depreciation) on investments, net realized gain (loss) on termination of swap contracts and unrealized appreciation (depreciation) on swap and cap contracts. (2) Our average yield on Agency RMBS for the period was calculated by dividing our interest income from Agency RMBS by our average Agency RMBS. (3) Average cost of funds and hedge for the period was calculated by dividing our total interest expense, including our net swap and cap interest income (expense), by our average repurchase agreements. (4) Interest rate spread net of hedge for the period was calculated by subtracting our average cost of funds and hedge from our average yield on Agency RMBS (5) Operating expense ratio is calculated by dividing operating expenses by average net assets (6) Leverage ratio was calculated by dividing total liabilities by net assets * All percentages are annualized. Income Statement Data (in 000’s) Non-GAAP Measure (in 000’s) Non-GAAP Reconciliation (in 000’s) Balance Sheet Data (in 000’s) |
 14 Financial Highlights Steep yield curve and attractive spreads in target assets Tailwinds likely to continue Investment Company accounting provides transparency |
 Investment Outlook May, 2011 JMP Securities Research Conference May 9, 2011 |