CYS Investments 8-K JMP Securities Financial Services and Real Estate Conference

JMP Securities Financial Services and Real Estate Conference

September 13, 2012

Investment Outlook

September 2012

Exhibit 99.1

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.

CYS: Overview

Agency Residential Mortgage Backed Securities

Financing lines with 34

lenders 

Swap agreements with 18 counterparties

Self managed: highly scalable

Kevin Grant, CEO, President, Chairman

Frances Spark, CFO

Company intends to distribute all or substantially all of its REIT

taxable income

2

A Real Estate Investment Trust formed in January 2006

Target Assets

Senior

Management

Focus on Cost

Efficiency

Ample Financing

Sources

Dividend Policy

CYS Goal: Deliver Competitive Total Return through

Dividends

CYS

vs.

Bloomberg

REIT

Index,

S&P

500¹

(%)

CYS Expense Ratio²

(%)

3

1

June

11,

2009 —

Sept

7,

2012

2

June

11,

2009 —

June 30, 2012

Source:  Company filings, Bloomberg

Spread Environment Becoming More Challenging,

However, Hedging Rates Remain Historically Low

Mortgage Yields at All Time Lows

Par-Priced

7/1

hybrid

rates

now

1.38%

(1)

30

Year

fixed

rates

now

2.60%

(1)

15 Year fixed rates now 2.16%

(1)

5 Year Swap vs. 1 Month LIBOR: 1/2005 –

9/2012

5/1 Hybrid Net Interest Margin: 1/2005 –

9/2012

Source; Bloomberg

(1) September 7, 2012

September 7, 2012

September 7, 2012

4

Steep Curve

Creates positive carry

Very low cost of financing

Good ROE

Hedge flexibility very important

Fed still fighting deflation

Investment Environment

15 Year Hedged

(i)

15 Year Unhedged

(ii)

Borrow Short

Invest Long

September 7, 2012

Source:   Bloomberg.

Note:       Spreads calculated as: (i) 15 year Current Coupon Index  = 50% 4 year swap, and (ii) 15 year Current Coupon Index

5

15

Year

Fixed

Hedged

with

Swaps:

1/1/2005

–

9/07/2012

Fed Voters More Dovish

Hawkish

Dovish

Neutral

Lacker

Duke

Tarullo

Lockhart

Pianalto

Yellen

Raskin

Bernanke

Governors

2012 Voters

Williams

2013 Voters

Dudley

Evans

Rosengren

Bullard

Powell

Stein

Dudley

George

6

Source: federalreserve.gov, 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.

The Fed’s Tools: Forward Rate Guidance; OT2; QE3

Fed Ownership Shares of Nominal Notes and

Bonds in March 2013 with and without OT2

•

With no operations after OT1, the Fed would own nearly 30% of the 10+ sector.

•

With OT2, that share would increase to over 40%.

Fed Ownership of Treasuries Outstanding

Maturing in Over Ten Years

Source: Macroeconomic Advisers, U.S. Treasury, Federal Reserve. Updated May 24, 2012.

7

Will the Fed Rationalize High Unemployment?

hys•ter•e•sis

(his/t

re/sis),

n.

Economics.

1.

a

process

whereby

a

high

unemployment

rate

during

and

after

recessions raises the long run equilibrium or structural unemployment rate, otherwise known as non-

accelerating inflation rate of unemployment (NAIRU).

Probability of Reemployment by

Duration of Unemployment, 1995-2012

In %

Longer Duration

Unemployment, 1990-2012

In %

Unemployment

Rate (Left Axis)

Unemployed for 27 Weeks over %  of

Unemployed (Right Axis)

0.95

1.00

1.05

1.10

1.15

-2

0

2

4

6

8

10

12

1981-82 Cycle

1990-1991 Cycle

2001 Cycle

1973-75

Cycle

Current Cycle

14

16

Real GDP Growth in Recoveries

(series set to 1.00 at NBER peak)

1995

1999

2003

2007

2011

Note: Shaded bars indicate business  recession, as defined by National Bureau of Economic Research

8

Source: BEA, Recent Developments in the Labor Market: Remarks by Ben S. Bernanke to the National Association of Business Economists, March 26, 2012, Macroeconomic

Advisors, U.S. Department of Labor, BLS, Haver Analytics

Central Banks Globally Decidedly More Accommodative

Xiaochuan

China

Bernanke

USA

Shirakawa

Japan

Canada

Carney

Australia

Stevens

New Zealand

Bollard

Draghi

EU

Tombini

Brazil

Subbarao

India

Central Banks are Focused on Global Deflation Risk

Hawkish

Dovish

Neutral

Draghi

EU

Shirakawa

Japan

Subbarao

India

Xiaochuan

China

9

Long Term Budget  Outlook vs. The Fiscal Cliff

Publically Held Federal Debt,

Historically and Projected under Two Policy Scenarios

In % by year

Extended Alternative Fiscal Scenario

Extended Baseline Scenario

-

Maintains current policies

-

Extends expiring Tax Cuts and other forms of Tax Relief

-

Prevents automatic spending reductions and spending

restraints

-

Current laws remain unchanged

-

Scheduled Tax Increases and Spending Cuts occur

Revenues remain near historical average

Gap between non interest spending and revenues

widens

Noninterest spending continues to rise, but is

pushed up due to population aging, rising

healthcare costs

Source: Congressional Budget Office, June 2012

10

Economic Recovery Below Normal Pace

U.S. Retail Gasoline Price, Regular Grade

1976 –

Present

Capacity Utilization: Manufacturing

1970 –

Present

%

Civilian Unemployment Rate

1940 -

present

%

CPI-U All Items, Core

1940 –

Present

%

Change

-

Year

to

Year

Total Nonfarm Private Payroll Employment

2000-present

000’s

Challenger, Gray & Christmas, Inc.

Job Cut Announcement Report

1/2007 –

6/2012, by Quarter

Source: S&P, Federal Reserve Bank of St. Louis, Fiserv, and Macromarkets LLC / Haver Analytics, BLS, Challenger, Gray & Christmas, US  Dept. of Energy, NYMEX

11

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Q1 89

Q1 91

Q1 93

Q1 95

Q1 97Q1 99

Q1 01

Q1 03

Q1 05

Q1 07

Q1 09

Q1 11

Mortgage Market Shrinkage Likely to Continue

Residential Mortgage Debt Decline Driven By:

1.

Declining home prices

2.

Delevering Consumers/Homeowners

3.

Psychology of lower leverage

4.

Low volume of new and existing home sales

5.

All-cash home purchase transactions, and higher downpayments

6.

Scheduled principal payments

7.

High percentage of cash-in refis versus cash-out refis.

Quarterly Growth in

Residential Mortgage

Debt

Q2 2003 –

Q4 2010

Growth

Home Mortgage

Originations

2000 -

2010

In billions

Refinance

Purchase

Home Mortgage Debt

Outstanding

2000 -

2010

In millions

Total Home Mortgage Debt

Median Credit Score at

Mortgage Origination

2003-2012

Source:  BLS, LPS Applied Analytics, Financial Stability Oversight Council 2011 Annual Report

12

Net Issuance

Iowa Electronic Futures Market:

Obama re-elected and a Republican Congress

Source: The Iowa Electronic Markets

Romney

Obama

Republican House/

Democrat Senate

Democrat House/

Democrat Senate

Democrat House/

Republican Senate

Republican House/

Republican Senate

2012 US Presidential Election Winner Takes All Market

As of September 6

2012 Congressional Control Winner-Takes-All Market

As of September 6

13

Intrade:

Obama re-elected and a Republican Congress

US

House

of

Representatives

–

Republican

Control

Nov 13, 2008 –

Sep 9, 2012

Source: www.intrade.com

US Senate –

Republican Control

Dec 8, 2008 –

Sep 9, 2012

Obama Re-election

Dec 6, 2008 –

Sep 9, 2012

57.6%

90.4%

53.7%

24.1%

14

A European Country Leaves the Eurozone before 31 Dec 

2012

Electoral Mapping

Connecticut (7)

Minnesota (10)

New Mexico (5)

Oregon (7)

Pennsylvania

(20)

Leans Obama:

49

Arizona (11)

Georgia (16)

Indiana (11)

Missouri (10)

South Carolina (9)

Leans Romney:

57

Colorado (9)

Florida (29)

Iowa (6)

Nevada (6)

Michigan (16)

New Hampshire (4)

North Carolina (15)

Ohio (18)

Virginia (13)

Wisconsin (10)

Maine (4)

New Jersey (14)

Washington (12)

Likely Obama:

30

221

191

Toss Up: 126

Source: realclearpolitics.com

9/7/12

Solid Obama:

142

California (55)

District of Columbia

(3)

Illinois (20)

Massachusetts (11)

Rhode Island (4)

Delaware (3)

Hawaii (4)

Maryland (10)

New York (29)

Vermont (3)

Likely Romney:

58

Montana (3)

North Dakota (3)

South Dakota (3)

Tennessee (11)

Texas (38)

Solid Romney:

76

Alabama (9)

Alaska (3)

Arkansas (6)

Idaho (4)

Kansas (6)

Kentucky (8)

Louisiana (8)

Mississippi (6)

Nebraska (5)

Oklahoma (7)

Utah (6)

West Virginia (5)

Wyoming (3)

15

Economics of Forward Purchase

16

Example: 15 yr. 2

1/4

% drop = ~3/32 pt. per month

1

Source: Bloomberg 09/07/12

3/32 represents a discount to the purchase price of the security of approximately $0.30 per month from trade date to settlement date.

1

Portfolio Composition and Results

CYS Agency RMBS Portfolio

1

CYS Common Stock Dividends

2

: 9/09 –

9/12

Total Agency RMBS: $14,078.1

million

20 Year Fixed

Rate, 1%

10 Year Fixed

Rate, 2%

1

As of 6/30/12

2

On

August

3,

2012,

the

Company

issued

shares

of

7.75%

Series

A

Preferred

Stock,

for

which

dividends

are

paid

quarterly

at

a

rate

of

$1.9375

per

annum

per

share.

17

Portfolio Characteristics

* As of 6/30/12

Par Value

Fair Value

Weighted Average

Asset Type

(in thousands)

Cost/Par

Fair

Value/Par

MTR

(1)

Coupon

CPR

(2)

10 Year Fixed Rate

$239,966

$253,746

$103.79

$105.74

N/A

3.50%

15.70%

15 Year Fixed Rate

8,130,084

8,575,298

103.34

105.48

N/A

3.38%

14.40%

20 Year Fixed Rate

138,700

149,688

103.14

107.92

N/A

4.50%

21.10%

30 Year Fixed Rate

1,832,303

1,937,542

105.43

105.74

N/A

3.87%

—%

Hybrid ARMs

3,015,667

3,161,861

102.63

104.85

67.4

3.09%

18.60%

Total/Weighted

Average

$13,356,720

$14,078,135

$103.47

$105.40

67.4

(3)

3.40%

15.80%

18

CYS Agency RMBS Portfolio Characteristics*

(1) MTR, or “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. After the fixed period, the interest rates on 100% of our hybrid ARMs reset annually.

(2) CPR, or “Constant Prepayment Rate,” 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 CPR 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.

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

19

Historical Financials

(1) Core Earnings is defined as net income (loss) excluding net gain (loss) 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) Our 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) Our 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) Our operating expense ratio is calculated by dividing operating expenses by average net assets.

(6) Our leverage ratio was calculated by dividing (i) the Company’s repurchase agreements balance plus payable for securities purchased minus receivable for securities sold by (ii) net assets.

* All percentages are annualized.

20

Three Months Ended

6/30/2012

3/31/2012

Income Statement Data

(in

000's)

Investment Income –

Interest Income

$71,747

$65,369

Total expenses

14,272

11,972

Net Investment Income

57,475

53,397

Net gain (loss) from investments

61,113

33,150

Net gain (loss) from swap and cap contracts

(24,356)

(17,429)

Net Income

$101,705

$69,118

Net Income Per Common Share (diluted)

$0.87

$0.66

Distributions per Common Share

$0.50

$0.50

Non-GAAP Measure

(in

000's)

Core Earnings

(1)

$44,788

$41,891

Non-GAAP Reconciliation

(in

000's)

NET INCOME

$101,705

$69,118

Net (gain) loss from investments

(68,586)

(33,150)

Net (gain) loss on termination of swap contracts

--

--

Net unrealized (appreciation) depreciation on swap and cap

contracts

11,669

5,923

Core Earnings

$             44,788

$             41,891

Core Earnings per Common Share (diluted)

$                   0.38

$                   0.39

Three Months Ended

6/30/2012

3/31/2012

Key Portfolio Statistics*

Average yield on Agency RMBS

(2)

2.62%

2.78%

Average cost of funds and hedge

(3)

0.91%

0.90%

Interest rate spread net of hedge

(4)

1.71%

1.88%

Operating expense ratio

(5)

1.33%

1.46%

Leverage ratio (at period end)

(6)

7.6:1

7.7:1

As of

Balance Sheet Data

(in

000's)

6/30/2012

3/31/2012

Cash and Cash Equivalents

$13,486

$10,643

Total Assets

$14,623,128

$13,555,905

Repurchase Agreements

$9,763,313

$8,234,669

Net assets

$1,629,854

$1,525,792

Net assets per common share

$13.52

$13.14

Financial Highlights

Steep yield curve and attractive spreads in target assets

Tailwinds likely to continue

Fed Transparency very helpful

Investment Company accounting provides transparency

21

Investment Outlook

September 2012

JMP Securities Financial Services and Real Estate Conference

September 13, 2012