AGNC Investment (AGNC) 23 Apr 242024 Q1 Earnings call transcript

Company Profile

Participants

Katherine Turlington	executive
Peter Federico	executive
Bernice Bell	executive
Christopher Kuehl	executive
Aaron Pas	executive
Bose George	analyst
Richard Shane	analyst
Terry Ma	analyst
Crispin Love	analyst
Douglas Harter	analyst
Jason Weaver	analyst
Merrill Ross	analyst
Jake Katsikas	analyst

Call transcript

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Operator

Good morning, and welcome to the AGNC Investment Corporate First Quarter 2024 Shareholder Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Katie Turlington in Investor Relations. Please go ahead.

Katherine Turlington

Thank you all for joining AGNC Investment Corp.'s First Quarter 2021 Earnings Call.

like the I'd harbor begin, we to safe review statement. Before constitute presentation call not that facts, Act the of and Litigation conference Private contains of recitations statements the meaning corresponding historical XXXX. are This Reform they slide statements Securities within extent to of forward-looking the

from of in to Certain to Exchange law. materially statements Reform this factors to obligation without notice. All outcomes Act. statements many the to such subject update and forward-looking those that the from AGNC's protection of subject required We harbor results in forward-looking date only materially change and forward-looking intended are this at safe factors are unless are statements any filed differ Copies of the SEC's those presentation and periodic forward-looking as by Actual Securities due forecast cause website with provided the sec.gov. impact statements actual reports be could control presentation included All the to could the on by made are available beyond the contained are Commission. the results of differ AGNC. in our included to disclaim

Aaron turn Executive Executive Sean include With the Senior Director, and Peter Development. Officer; Federico. on Strategy and Participants call Vice I'll this Bell, Management; President Officer. and President, President, to Portfolio Reid, Executive Financial Chris Pas, call Federico, and Peter and Kuehl, Investment President that, Chief Chief Officer; Bernie Non-Agency Chief President Vice Vice Corporate over Executive Vice

Peter Federico

and transition earnings call durable about nearing and AGNC X.X% emerging. a and its the last our of value conclusion, we a growing AGNC for joining that for quarter, difficult our our compelling driven a thank On investment was talked slowly favorable strong environment by MBS Good our combination you all first morning, economic appreciation. of that Agency return the call. generated in period was for book dividend confidence earnings quarter, and

tightening attractive cycle and MBS the positive trading We short-term highlighted performance over some more our to remainder in rate and decline first that would present AGNC's belief interest Agency this will quarter that peaked for ultimately all of remain new, degree in range. These the volatility this were dynamics year. would rates drive the had that

in With respect developments to monetary positive negative the there both and policy, were quarter.

positive short-term a the of growing members among the interest was side, there consensus Fed regarding and level rates. On direction

participants tightening the the participants was if policy almost and reflected all to March it stance policy would a at be to appropriate cycle minutes, that judge noted rate for peak as expected. year likely restrictive As this that this in its evolved monetary less economy move

Chairman before cuts and more not Powell far In rate Congress, away. a position be waiting that characterized as for data bit the his testimony Fed's may

the and continued Fed would development stronger-than-expected the negative an that initial treasury pace not hoping it This decline remain positive fixed its The also a Importantly, indicators robust. balance labor growth economic portfolio show at reduce did surprisingly the development upcoming Inflation was action indicated is readings the sheet investors. in data. on was of income Fed runoff for that for meeting.

curve. increased environment rate timing positive result, during considerably future uncertain. the a of interest across The quarter gradually cuts the rates interest became magnitude as more As and generally rate was the yield

range on Interest and meaningfully. securities declined Also higher with the across MBS this mixed, volatility backdrop, rate well-defined the was coupon Agency the MBS coupon coupon spread securities widening performance quarter. and Agency also Against spreads spreads tightening. declined on stack lower during same noteworthy, volatility remained spreads meaningfully in trading

curtailed the bank Agency first substantially to in XX% would part we supply experienced first proved was This be affordability greater favorable uptick due than demand in what last activity. seasonal year. technicals the quarter XX% quarter, revised. issues expected. the demand for in III as volatility significantly that and to At and Basel In The were be than was demand bank fact, in time, to spread same lower origination factors also a MBS view

these interest midpoint volatility first results. good Absent but this is an and market to optimistic market due Collectively, monetary That of the less evolving meaningfully the stability of income the the expected quarter, turbulence said, expectations adverse episode. favorable in to risks. of periods relative MBS to policy. relatively factors range. below Fed are recent period of developments, increased period be geopolitical policy. the of drove our sharply such a rates April trading be monetary of and the first turbulence believe After given benchmark will escalating a quarter nature cause change inflation short-lived. this direction remain further Against spreads We fixed widened inflation of backdrop, Agency example which

expanding for MBS reason beyond us yields with support long-term expected, continue X% will are explicit and be U.S. the the backed the the Looking yield curve decline, give appealing to government, recent above rate favorable Agency monetary investors. policy steepen will the fundamentals interest end. by optimism of an and to will absolute for downturn, an Moreover, quantitative to evolves volatility universe if Agency come and of MBS largely tightening as

of cuts run Agency performance specific the is timing Fed not rate critical long The of MBS. to

as a greater vehicle, to Agency over time. I highly Bernie levered believe that, these results Bell now will dynamics MBS to turn investment well With from over investment our benefit we AGNC is they call liquid to discuss pure-play evolve favorable in the detail. positioned As financial

Bernice Bell

Peter. you, Thank

$X.XX X.X%, economic of $X.XX tangible an of had per AGNC common generated a of quarter, tangible $X.XX which in declared per value share. first dividends share increase common the book and equity on included return share and income net comprehensive For per

challenging Agency X% point basis week, lower the our late after moving rates and XX spreads coupon April As been higher by our the accrual. Peter stack. tangible At worst value monthly about the mentioned, environment book points deducting widening longer-term dividend in to last was with investment more sharply has MBS interest XX across net

Leverage for swap of spread The leverage the QX, the to as in interest with points rates, to compared the points modestly from roll to XXX end dollar decrease was yield interest than the average to decline of basis and for our Net first decreased asset of a decreased income increase at Xx more of strong as per the as end net under offset in CPR $X.XX the quarter quarter portfolio costs per average quarter Xx share. at quarter for while projected X.Xx in for XXX the QX. to X.Xx the basis a equity increased modest the points quarter higher portfolio. remained spread XX tangible share little $X.XX of XX.X%. higher Consistent for quarter average our in our to basis due life

$XXX the CPRs quarter. also approximately Actual the for significant averaged equity quarter, aftermarket successfully to of the book for a through quarter raised premium. In price first down at offering our prior we common X.X%, from million X.X% program

now opportunities volatility, but mortgage also to of Kuehl over discuss as of with We not turn Chris and to I'll to $X.X episodes the as with of XX% billion investment Agency of strong. MBS continues substantial only that, market. our withstand our the they be cash unencumbered attractive or very call advantage the liquidity arise. enables And quarter to liquidity to believe take us Lastly, of agency end, tangible equity

Christopher Kuehl

this XX% handled with assets risk repricing approximately the quarter basis of more yields the XX points, higher economic general, material for an the corporate return In and index a than Thank basis generating cuts in investment-grade expectations Accordingly, Bloomberg XX XX U.S. magnitude in data the you, of during Fed bond were points. Bernie. adjustment to X- excess and market Stronger-than-expected first respectively. well gaining by XX-year led rate S&P considering of the repricing XXXX. on treasuries

aggregate, U.S. with performance index the Bloomberg In sectors treasuries. income wider fixed lagged spreads other MBS versus slightly Agency of the

index approximately the the points However, slow The to aggregate tightening supply income fixed widening potential coupons. heavily a individual coupon on very relatively backdrop given in relatively MBS rates, contrast, of lowest the compared supply, coupons provided to performed basis MBS MBS weight performance with prepayment Agency as basis magnitude spreads steady speeds, considerably, that large of similar performed the during limited year encouraging as points on X moves. XX coupons inflows these well benign for these higher the quarter, was last way favorable by underperformance varied the and for XX as bank In during move coupons.

as the at of March Our to portfolio from increased billion $XX.X the start $X.X XX. the billion end of year quarter

holdings quarter, we continued versus optimize and move the TBA. our in specified first to coupon up in During pools gradually

Ginnie Our ended as at Mae billion the billion approximately $X.X higher of $X.X TBA TBA with end. quarter position quarter representing

spreads heavier last call X basis XX, on during quarter, began in billion X the allocation $XX.X totaled swap-based as on portfolio and mentioned of hedges. favor hedge our benefited points as March gradually widened move points to X- swap respectively. to composition the the at the and basis I XX-year the a This quarter and points curve, of we Our performance shift first as

likely discussed, data-dependent current some Peter the Fed As markets. volatility nature of create will policy in

of environment with in non-agency liquid However, longer-run low to to call the MBS prepayment the earnings markets. the financing I'll for and favorable deep risk over markets. historically turn Agency now Aaron wide spreads, very levels discuss is

Aaron Pas

Chris. you, Thank

credit fundamentals, most rate to employment typically bolster performance. environments returns across have robust credit both fixed sectors. the income in excess negative credit continues resulting generally quarter, performed well the in and for higher Consequently, corporate implications While consumer landscape current positive

by an respectively. investment indices points, adjusting tightened role QX, in XX for approximately credit for high-yield in spreads the and XX As grade basis indicator synthetic the

we divergence to metrics. On continue the side, consumer expect increasing credit performance fundamental an of

are pressures, mortgage previously degrees rate note and As households who have environment immune bifurcated housing inflationary varying impacts debt, inflationary low with are experienced to between not. U.S. and households noted, primarily we households have higher renter who rate of the relatively

such debt. divergence of the we payments between renters performance the behind falling groups as high of credit As relatively risk a with obligations card at auto loan result, widen expect and on a to credit rent, X

deteriorating our this negligible significant prolonged increased a rate material extent persist construction, of exposure could, to have time. for become be issue and portfolio for a to holdings. inflation Accumulated period of however, a a to they on cohort for broader would performance levels the pressures expected more consumers current our group Given impact

line capital of with of Turning market The continue value returns. credit we to prior down the of the value our to holdings risk-adjusted transfer the did to quarter. billion, ended though our saw unchanged, composition securities we $X in opportunities our was where rotate our improve quarter portfolio. risk structure, largely securities at non-Agency some The relative

non-Agency Lastly, With attractive. relatively over spreads that, although returns, landscape for to presenting a back future for challenge turn securities and is I'll funding the asset call remains stable tighten, continued projected have to Peter. currently the

Peter Federico

questions. your to you, open We'll up Thank Aaron. now call the

Operator

[Operator question first Instructions] of KBW. George the line comes with The from Bose

Bose George

the terms you spreads of what Can current implies and that discuss level in ROEs? incremental of

Peter Federico

quarter-to-date. XXX below range, the middle when Bernie widening of has range. approaching are mortgage I question, at X- where in at treasury middle worst-performing across to coupon kind actually as spreads look they mortgage but see April. look of appreciate coupon XX-year coupons, the at Bose. XX points coupon the the between of spreads area the and Sure. middle and somewhere low and X.X% the about you are Yes, XX mentioned, still really the you The range, roughly, the But of talked and basis month the current we the the the stack we now been they're

XX-year it swaps like at importantly that's where to look basis and XXX X- you are, points. If more

and obviously XXX on more treasuries our that put part in So the treasuries swaps your translate But than depends in of we hedge and to initial XXX current stack net interest to, will point mix leaning margin this range. that could the coupon swaps hedge basis would towards given up the now. environment of drive right margin way mix it what the

And low XX% of typically XX% it, structure. leverage that and the the Xs this currently that ROE call cost operating in somewhere in to translates our given with to between, environment, expected -- mid-Xs operate we mid still

the they're be to at are a more obviously that mortgages seems last attractive from our than perspective. more were compelling right and attractive level of end now, quarter, pretty they So

Bose George

the level And you I on Great. comfort just guess that's the the within related dividend, question. mentioned. now, then a Can but breakeven ROE I just Okay. you high the XXs, guess, range just talk about

Peter Federico

in past, Yes. on you that And out the you how pointed at it as look calculation. depends

on yield would our you're I think dividend referring the that to translate XX%. and common to

a on just and to It's calculation, think with that about did would the we it think like if you'd So common common But XX% you amount went look given end that common want to little of about one was the preferreds. same average value of preferred we've that preferred ROE on talked think, level. I'd lot a our lot structure leverage have reset the And at shareholders. given way. value our there's there. capital you It's leverage, and it, of generating did cost I last The up quarter but stock, incremental around of about still if of it a of incremental at important now that's our the through, think higher an above to I for you of our end X.XX%. this.

if dividends think our from capital, of a that it a you about common costs we think you about the pay of and preferred cost So dividends of total as equity. amount percentage and operating

thereabouts. that to quarter, I last around or XX.X% of the At think end came

at think cost the remains portfolio dividend and appreciate that that of see look I can Bose. our current at And today well valuation capital the you good levels. questions, total I So level aligned. I

Operator

question the with of next Rick The Shane from JPMorgan. line comes

Richard Shane

Look, facets one so is the portfolio swaps. of contribution the of the from interesting

Over contribute income. about your to essentially next XX% off. of several $X.X Those you billion months, have notional swaps the rolling spread XX%

how you you As that replace runoff? do the given forward, opportunity, look

Peter Federico

I the interest about of extent. actually swap question, didn't part important Rick. I an but lot some think our talking lot. a And because Yes. a spread swap was performance margin, and But to first think you about appreciate we this. you're tightened spreads think spreads swap question, about the your talked that I Yes, net of hear I when the -- driver performance

economics net interest is went remained Last we that robust. it Our that quarter, through. really has margin points. the just XXX consistent basis really, And was with not

an be by XX%. our about of just think XX%, take think ROE points, high income to of that at you roll as from going an points that basis our margin you're going talked divide and to get which ROE in mid- spread divide ROE about about, you're and that XX% that margin, you perspective, of XXX-ish If are net and common dollar around our would teens. interest net an with XXX get and business, of that or net interest consistent equity, economics the to we XX%, The basis

run off the billion have we had decline first consider. interest -- And that $X.X off, what's and to in you're going spread dollar our right, net interest margin. those in maturing we way, happen off billion Those are time and though, will those as over over quarter our net that There the got still come down. factors, is margin of swaps by other and somewhat contributed about roll and $X that our mature, rolling you to time will or in because net about to slight swaps

So just it's as rolling swaps not as easy off. those

put that on them. will carry We other swaps positive have on

or also, market so our asset longer-term today, XXX by is example, for below a XX-year a by, points. yields. on basis still still put yield you If swap take positive a carry it's And

market is yield below asset XX, basis XX yields. still Our points

So Chris in some the assets over, roll portfolio continue team last our you saw to yield up around, our like as we'll move we and quarter. seeing asset end uptick and

over that our down with longer margin interest time, of the business. line over But in net come time a will more economics

new off, in just get come that to swaps the should see with previous over in what you'll is the that's down next quarters interest roll margin swaps which economics as really business, yield old talked the years net replaced, of assets on, question. about alignment the several mark-to-market we our So come back

Richard Shane

factors, you're the that's is the the and that as to that policy And forward what's of does really dividend get Yes. dictating all which economic... it. looking to punchline, really those Got

Peter Federico

as exactly I appreciate based right. the interest dividend from our current economic seeing perspective It's opposed that that the clarification. policy reflected to that earnings an setting period of return gets net the That's on in margin. level we're

Operator

Terry Our with next Ma line comes of the Barclays. from question

Terry Ma

then just the you on be thought you the just color little once what give a that will short-lived. gives this volatility confidence expectations mentioned be volatility year? you your will would on that And near-term settle more spreads you maybe where So short-lived? bit recent it maybe Can

Peter Federico

to lot our and fact think in quarter really Sure. than referenced tried our similar I previous quarters point extent this Chris remarks. this in Chris looked some different And our we that's had Both I the to that And prepared address a a critical perspective. when moves. from

very there a but significant stable a of from What very occurred first generally the quarter timing repricing was the rate the of conditions, and in Fed. was short-term magnitude moves market

to way, be shift likely policy the move data. the a paradigm in communications an not yet in its shift clear and rate at It respect looking ease. that monetary didn't was a was the at to it again. Fed in and quarter has show was likely a another really Fed had and first going What of It peak X.X% next the policy. a plateauing was not we was with become CPI and Said number the X.X% simply Importantly, just for. was that X.X% then improvement came in of the

And to And reports moved in out ease. following, X CPI basis one of the the treasury X at those or stance up each points. XX taking XX days XX-year

or too market the the year, incorrectly started X Fed be times. may the probably so, we ease optimistic, when So expected X to

X.X%. still around which to funds out than and only there's total, the Fed's we projections is, tell rate going own in as the aggregate, Now X market what the at Fed has in long-run That's X.X moves XXXX higher here now moves market's that funds today, sit us repriced the settle year materially in meaning this Fed the target is is importantly, according to futures X%. only to

of not short-term is we significant We path So repricing of a paradigm have rates. occur interest very did had shift. the a what

or continues show a policy. still the Fed of there believes report. inflation that signs to be If end going this will We shift important and But not data get inflation I in believe the the don't of to monetary think inflation that's at evolve could PCE in We reaccelerate, we happen. believe, improvement. week

will which, that out own this And year, end be the comes number with Fed's not materially the the the remove. of to That's off going this to Fed estimate We toward by of X.X%. way, target, at of move end more the PCE the Fed's projection, is where at long-run week. the expected

the that to like a it, is the XX-year report think place healthy that's the and in seems has move healthy I So simply where come magnitude pretty are movement going X.X% a the a X.XX%. ultimately direction this rate to think we occur a ultimately Fed the of favor the where just those, at, to think funds inflation going We X%. ones. cuts That shift. of of context call of in target the And repricing been short-term for XX-year paradigm Fed to not

moved. had lot had spreads we X volatility expected, same X or have get of geopolitical so opposite inflation the We are And we'll of than reports We sort following better or at If inflation a the that repricing reports. in risk. direction. significant

data, Again, you perspective. largely good the when the it's we be at clear that little once is think middle monetary I in months policy With X X of you will seems asked or uncertain, our look from to for pricing of eases that. now, coupon sufficient confidence. that then over. repricing range, direction everybody will be spreads And a row current think data a near but of place the they Right to respect better like again. the have and is spreads, the Fed again get looking in the a

mortgages at to seems between now be against the XXX healthy some coupons a XXX the of -- have origination. April place seasonals should We and seems to healthy Current place. X- points like XXX XXX, in do terms basis a swaps, treasury seasonal of worst like next negative of XX-year months this and for May kind right

now market place of, So right repricing think, the sort with the taken place. is has a in I that good

Terry Ma

you gap, duration now gap. And ratio running it. Got and a took your duration positive and you're hedge ratio the on slightly your guys hedge then just down

a then So move where this book you're environment. in maybe that just about more little color on running bit and talk comfortable the

Peter Federico

cost run this debt More sense rate environment. protect a of changes. the about to It obviously We a rising Sure. our our in in for essentially while. order move high short-term I've make Fed's ratio ratio. gradually with XXX% does talked hedge as outlook to monetary wanted hedge very short-term termed for a than funding down out policy us to our

now over more in our lower in would even probably some such ultimately to want our a confidence some at and the a that then magnitude we when would so that get the inflection that as expect process, sense, We're operate unhedged, down. And mix. policy with time, come hedge and at cuts, point ratio of part we'll operate a short-term Fed the bigger with, the easing point percent debt of monetary funding to we have of I

time, to mentioned, positive mentioned that. that? we'll sort little movement And have do we gradual a you I think hedge him talk to our Chris over of a want and swaps mix. in our bit do about a So this. speak towards outlook. to let more Chris, I'll He

Christopher Kuehl

Yes.

sulfur our is obviously funding So based.

and bid have couple mortgages investor a better were significant opposed carry. our of highly portion the But base want for with And also to the more sulfur-based hedges correlated we have of funds to years, banks. which was so dominant the as treasuries, given swaps, last logically, generally over index

have made component treasury-based to sense book more a it And hedge our hedges. sizable of so in

time issuance were extraordinarily a U.S. grow banks holdings. securities was position the not also to a Treasury in when high at

an to the have that our effect asset we're cheapening stabilizing to so had deposits hedge QT treasuries bank with maintain book likely of and swaps. moving end, gradually portfolio And in within versus And drawing now do But be a want composition the this hedge diversification gradual as our concentration to just and we will hedges. swap-based on higher a shift, side. we

Operator

Sandler. of next from question comes Our Piper Love Crispin with line the

Crispin Love

very which positive. the Government as flows have of implications only fund agency, for tells have positive part been positive been Just story. looking have flows, well, but at fund bond flows

you're flow So now can the on you speak Who just major MBS. are to what Agency the side? of seeing right buyers

think you rate recent of bit? little a about but quarter, some first do for mentioned banks moves I back a keep on could the think of in you the coming them some bit the sidelines

Peter Federico

certainly did that. Yes. see Well, we

You're right.

this look generally first place at feel stayed positive -- throughout at the the you any big fund why why negative, like really quarter, of there the nearly was flows and probably got disruptive is of out bond took a bond despite week was or X, saw not like reason shift to we never part If the times didn't paradigm movement repricing X quarter there was of the where that because they in as maybe a actually last flows different year. amount but

the positive. to bond flows to neutral fund continue be So

way in to mortgage-backed outside think tightened coupons. lower securities. across fund we're first Those also quarter. at to the if starting I the were in in and the current they coupon really bond you in inflows X% coupon obviously into higher the quarter stack actually particular, hard above see underperformed flows particular, lower the the think are look on performed the The evident, mortgages where coupons X.X% complex are quantify, I are

shows high-yielding there's sort that for new those securities. that I demand you think of

out really around to that, attractive looks backup basis the looks also points. investment-grade again, XX to around to current It really at attractive that really, X.XX% again corporates. With widened treasuries. the we now That spread have, has coupon

particular, current yielding look cheap in the look to corporates grade, ones. They cheap coupon to highest mortgages So or investment treasuries. --

by think of U.S. is slowing. in quality, the I where environment an the government backed the credit ultimately economy helps the obviously support

demand unlevered has So a basis, a mortgage-backed that on not I securities going much actually those think agency on and but an positive fundamental. really run are so continue levered drive for to long basis, to

is while. So tend -- just take think trend time place They for in that reallocations. those I going for stay reallocations to slow-moving to a

Operator

UBS. Our of next from the Harter question comes line with Doug

Douglas Harter

kind The opportunity? you way market, that continued described and of of how about the you've capital raises attractiveness are thinking the

Peter Federico

were it the program, raise look quarter. the Well, the in at accretively to our market question. look mentioned, first at appreciate through first the And very of our the through capital I always opportunities. continue we shareholders, lens to at as at money those -- we and Yes, Bernie existing foremost. we'll And program obviously, able

the that a The also book affords of, really good the of us. capital first flexibility can it, but quarter generated cost-effective value accretion one, example by issuance, nature is be the that that

-- we in Chris $X over the billion mortgages about worth As of little $X a billion mentioned, quarter. added

If new about you towards the of levering we immediately. to able think given proceeds went capital if we half mortgage that, those of deploy those the will, you About amount into purchases were immediately capital market. raised, that

So there's a our no for from existing That value It's drag dividend to perspective. book translates accretive value. to shareholders.

which near to at it for But of spend We'll we'll bit of that. value we I Obviously, capital -- can for mortgages opportunities a activities, first gave our do pause. continue continue level, generate range, value opportunistic to markets our like generate if be we'll existing shareholders little of existing through to look tighter that. end better. look with do we quarter can mortgages certainly the this the us to did a lot time the in

Douglas Harter

could if And Peter, just then contrast. you

Peter Federico

sorry, I'm ahead. go Doug,

Douglas Harter

and And you you assets? see value how but add with today sorry. just ability leverage Yes. protect of to around given could add kind of -- No, that of if how book and/or and weakness add kind -- contrast move also leverage kind might new

Peter Federico

with moving I direction, think a but sort a of Yes. in a I we're And certainly because of moving appropriate the my want Fed. There's drive direction describe the made and of and our capacity way. would And initial the Well, we slowly, today, variables that is it in going lot flexibility. essentially to in lot because way comment I remarks to that's this positive have we volatility moving that we're leverage there's still of lots monetary going and along capital evolving. are we're our be still deployment that policy be to disciplined

Over is to outlook. the be our have in going even time time, may And we're there confidence where get growing. But more more confidence a we clarity.

a very have of $X.X strong billion. lot mentioned, a we have -- liquidity We position of as Bernie

think XX%. highest quarter a points As was just last it of equity, maybe of our percent at one I

you that over assets, think it's If about on X%.

So also of we a our And durable, we to we're be have capacity, investment the attractive important to opportunities. what's from about be outlook period a from going long-term, lot disciplined. entering that's want but that is we a think perspective

we deploy capital. So any to feel don't rush

like can can We be in disciplined. be feel we to like we the we like We opportunistic first were feel quarter. continue

evolve environment the so to is And going time. over

is consolidation to move spread another is grow. to reasons Said the to some behavior market. healthy mortgages of Mortgage the And way, for which in confidence lower can for Our a range see is of within important. we're the for I development high end think that think that the why occur. starting range. becoming end I what growing range, the trading will there's spread, it's And more trade I at challenging to the think mortgages

have from place funds X%. think just income how time, and all have to that confidence. once the how I market haven't rate ultimately, be driver will because the to the months Fed a to the doesn't unfolds that over the way changes. But have to and ease, move to behavior fully monetary market and X seen to X the Fed is really the we'll Fed's outlook We Fed confidence confidence, key a doesn't that start market of and they next the going them that but price Fed -- what policy moving fixed yet, for happens over the Fed the we'll the the all see evolve back That's see starts economy the

Operator

of Our with Jason next line the question Weaver Trading. comes Jones from

Jason Weaver

there. a hoping first the about you The talk little a you I bit Doug's in of on timing coupon subsequently. million issued the during deployment question quarter, little XX you and can bit expand quarter more that shares was capital and could the

Peter Federico

sorry, could had little the Just a I'm first repeat part? hearing trouble you the I question.

Jason Weaver

issuance trying the in raised I Doug's the was first expand deployment quarter. Sorry, on timing you and first of answer about to ATM question Peter. the just to the

Peter Federico

a Well, us gives I lot of the flexibility. ATM yes, like said,

it and program through So we're -- raise able immediately. to money the through our ATM deploy

where like simultaneously about staff. we'd a talk mentioned But almost. Chris gets coupon As you that -- deployed could really

Christopher Kuehl

We in in That phase $X Majority XX-year added during of was was quarter fair the higher which in roughly increase. the coupon terms. $X billion TBA. mentioned a MBS increase. Peter Agency billion value current

We also in $XXX ARMs. hybrid about million added

Jason Weaver

throughout or beginning of speak end? weighted to that? sort Was the weighted you quarter that towards Can the or

Peter Federico

We don't detail. but, usually give question, of those the sorts No. I appreciate yes.

Jason Weaver

that's No, implications were in change hedging might for portfolio the thinking Fed's And what the strategy, QT and strategy? that your fine. reduction here's -- how about you

Peter Federico

mentioned Chris a I'll couple just real of comments. as Well, quickly, make --

significantly to its with is As Chris move going portfolio. the mentioned, obviously, treasury to respect and first Fed

going to they to I so Fed running they're below, they're half cap announce the week make off appear off will that this the mortgages not at half. the of the cap on meeting based does by far So the next expect cut the at point minutes change cap actually that to treasury are running a mortgage the right because about now. at It

change a the expect that. to don't on I Fed So make

you come development, going to year, for also think positive that's of mentioned, speaking, treasuries down generally And less treasuries When a I to, and to has expect think regulation going about onerous, to that Chris to come as the swaps. us regulation run-off I treasury over push be bank and the But do to is swap. that actually I bank X. expect versus cap fact the remainder to

hedging be the has to respect to its handle think it's is still sheet. it So implication from an Fed to think with its portfolio changes this that's development. perspective. where And unclear an exactly its I going going important term, I to balance Longer how mortgage is a

example, came runoff out New X in may its a York how approach examples they cut of they Fed, Fed that where open mortgage the desk tapering Last at the had paper the markets was getting the portfolio and those half. show from week, cap both there for in scenarios,

purpose they did long-term and redeployed their over for think won't this mortgages. effect don't cap move, But treasuries. And that very could Now mortgages on they If at time that long able would get of like level happen, primarily of allow mortgages over any allowing a having initial achieve first for have the mortgages transfer and be of on occur their to practical the but achieve portfolio mortgage the wait to off a over because be treasuries. run that now how use time. that We'll would $XX that see a objective But think we're to a off right have would Fed's cap running to horizon, to structure that. treasuries be to choose could the that we'll stated stabilizing handles of still this years. be -- is I of that ultimately, they They into get multiple speed to billion. and have a Fed $XX a it impact sort of runoff I between are that. lower would if development market detail going billion positive

Operator

Our of comes Point. next Merrill the from line with Compass Ross question

Merrill Ross

just book current April not But the And in decline decline volatility, given might in portfolio X.X%? to the X% add the You leverage referred that is did to you given particularly value? answer the said. into the you this, Bernie what what --

Peter Federico

I the I'm sorry, didn't part. hear last

We a of connection. little bit have bad a

I think portfolio What was first second? to did in was, we the add part April? the the

Merrill Ross

The current leverage. leverage current

Peter Federico

It's Chris asset respect activity current the talk where the could net little value. given he's environment higher about to and portfolio little mortgages it's and seeing bit a date. around adding backup a With and leverage, today. to actually in X.X% in Yes. current value

Merrill Ross

Anything that's particular market? about today's

Christopher Kuehl

restructuring part, value sheet and changes earlier, I size in -- portfolio to as made. were the the given to coupons within coupons material sales during agency any some that M&A balance the lower had bank concerns around quarter, quarter-to-date. respect in respect lower mentioned the With haven't outperformed space, announcements coupons to With relative we related Yes. higher significantly of

coupons favorable response considerably refi in incentives last responses during higher we in reports that to compared also But with showed COVID refinance. to flatter very prepayment the with similar during refi wave saw what

well. stack. so upward benefited still generally relative across the sloping I'd up And value that coupon outperforming, higher coupons in the coupon as say is despite from And

Merrill Ross

Okay. I just have the Wouldn't one other to you I liquidity? unrelated maybe really you? question, it's curious. of I'm if margin, your you not don't mind. material The some mean callable. Series on use C, that's

Peter Federico

where bit capital accruing other higher rate though it has is returns that at than is that XX.X%, a our mentioned, evaluating is Appreciate the coupon -- right, common lot callable. that fixed preferreds the And of to higher is still given even shareholders. materially our one is benefit structure. are certainly even series that reset value We're of on our portfolio, our XX.X%. I on It little question. that as and you're But constantly the

as will relatively our we to of optimize for always opportunities we look So market preferred now. do, for look that capital. quiet been right The cost has

there opportunities I So rate there's of not the of forward. a the lot we to the remainder part move over of uncertainty. be the as activity going and preferred market. change expect because But that in might on in year,

But right So it incremental common we'll generate continue value to evaluate does now for that. shareholders. our

Merrill Ross

refinanced X%. MSA believe relative seems I huge really okay. series like trade X%. curious, to not a But, a at from that that, I'm value XX%

Peter Federico

the preferred important your at obviously, very we're coupon And is -- that obviously rate change other coupon. And important the the floating peak can -- very, rapidly. the other part point likely about of

of the and downward positive curve of right now. those a of series forward obviously, sloping coupons data, quarters be or in months So couple and is a so. in those very Fed The look of could year couple attractive there materially option inflation or lot will value a

Operator

BTIG. line question Eric with of from last comes our the And Hagen

Jake Katsikas

Jake This is for actually Katsikas Eric. on

think a possible outlook including to And speeds flesh mortgage kind would be headwind room you benefit speeds change maybe for up could or with your how economic of you earnings or one, see coming forecast a for bit you out rates you might on have recently. the do much faster little a prepayment First return?

Peter Federico

about want you talk do Sure. prepayment? Chris, to

Christopher Kuehl

X.XX% the the December composition, second reports spending we've more X.X% interesting some been mid-February the have had of with years months X% lows with the time pools rates X and sort last frame. -- through last year, of prepay mortgage of note originating slower had and sort coupon after speeds, X.X% the to rates to local around over It's we've our third spending the rates. over that couple quarter last than of after reports Given December

on had observed to to COVID what what speeds learned similar a what got we bit into on the response were XXX and quite than many during look incentive sizable refinance. we that feared points going insight of a slower we call a population of slower with, XX loans to And And was so it, than was refi loans to basis lot of like what with incentives refinance.

mentioned, provided as coupons. to this, It's interesting. a so has And tailwind I higher

we slower that factors to there saw refi of I the a think last what than are contributed number the likely during response wave.

have to faster better for holdings, which over So the small slower the feared. are a position. favorable than percentage With been even respect coupons, our last turnover what little there, speeds had are very little I'd of our lowest say, or year, a speeds a many

on hopefully, you insight outlook So that into our gives speeds. some

Jake Katsikas

might that. wide? historically just that what Appreciate is back mortgage going change do to remain been? leverage, historical does. range you think for And finally, it spreads range Yes, your And leverage at then all if

Peter Federico

these X%, X.X%. low was at print if X% or has we've highest out, over in ranged history long point, put and probably a the and probably look, back around thereabouts the you mean leverage I look numbers at the Yes. very our maybe

So it being have environment. versus really, can bookends. some about mortgage you what environment on wide, it's depends a spreads the on being of think is is sort spreads you rate volatility. the of But It interest mortgage spreads give you where if dependent when think really mortgage are, critical to to historically that's leverage driver tight about

was a income gone quantitative about equal, income securities the in where there's negative volatility challenging was times. other went through, ease at over Liquidity all we've fixed fixed last the as quantitative an significant all things talked Fed been market I of repricing couple high. a years, for As tightening, into environment just from bad that really lot

of element adjust way, leverage has have of down volatility another each sort a higher unit You to to risk it. Said leverage. the

to other all bring our to things down equal, the So for account had we increased leverage volatility.

like in on will and will it new policy. on depend interest hold leverage out the the the going view But X the market part quarters. mortgage As range we the the obviously that it's where importantly, of has to of changes, depend mortgage and liquidity confident monetary cost will as volatility high going now going spreads go. be may important held drivers for more Those this that for more of our end, not get rebalance, better environment forward. range to rates, It's spreads to of on break

Operator

completed for Federico, have closing turn We now session. over back like Peter remarks. the I'd to question-and-answer to the call

Peter Federico

again the Again, we this quarter. we time to at of everybody's look you end appreciate speaking second to forward and morning, the

Operator

you Thank for the joining call.

disconnect. now may You

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