DX - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Dynex Capital, Inc., Third Quarter 2018 Earnings Results and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. you. Thank Instructions] [Operator Investor may VP, your Relations, Griffin, begin you conference. Alison

Alison Griffin

President thank Lisa. SEC call XX, joining Boston, and Popenoe, COO. Good with Benedetti, you, the release call and you Investment today CEO; Officer; Chief XXXX. morning Byron The the Thank with CFO on was October and for issued this Steve filed Smriti morning, me us. is associated press and today's With and

website the may as at the Dynex release of You SEC's sec.gov. dynexcapital.com on as at homepage the view on well the press website

we contemplated plan this The to Securities XXXX. differ subject begin, within The similar statements quantified. certain actual forward-looking and inherently Litigation contain we which of the and wish call statements from project, unforeseen as some external of considerably predicted Act or words those those Before expressions events risks cannot to risks. identify timing believe, remind factors or be and/or that a result forward-looking results by of are Private Reform that could conference expect, you forward-looking meaning of forecast, the and statements of estimate, Company's may uncertainties, anticipate, projected

Dynex pleasure referenced I Investor Reports The presentation the page. on these Dynex Report the website CEO, information the as now under Investor be the of the factors SEC's link please additional live Byron which over to the found as turning the the website. This can with Boston. risks, Center the SEC. as Annual website. have through being with filed broadcast on slide For slide the ending December to webcast streaming be be may on on on on under call found refer the presentation, for XX-K also call over a XXXX, of Form homepage or period may Quarterly XX, The is Internet well document a Capital Center

Byron Boston

our want through that on conference if giving you I X to joining on away thank things all this take want you up and to Thank you, call you start the we this the you for focus Slides And us can got of X. slide deck, Alison, with couple call. from call morning. a

one, basis is rate and to generate increase flow interest rate fed Reserve a rates in our first, to see the shareholders. look you Slide see nicely the continued the Now, quarters, pictorial, distribute cash And has moving hikes can funds by despite over at X number and Dynex tightening. you'll eight point the Federal fed over past XX XXX Capital up solid long-term to as you'll

focused with have You $X.XX, but can with $X.XX. pictorial earnings, fluctuated see Slide you what a we X. we've we've our earnings, been fluctuating on dividend, see done around our can And

we the believe have effects significantly moved take side global away. and the the fed continue Now business anticipate flow four. as finally, of And then the continue economic generate approaches today's in we model. cash while environment, striking of capital economy already tightening developing three, this return favor Federal Reserves long cycle. we distance end Number market. that factors up are We end improving tightening to in and to negative its opportunities global of Long-term number two, the within solid are cycle. Rates potential number

in supports be assets Securitized Let the a global a the are by for REITs. the investments safest there government burdened uncertainty. States mortgage and globe long-term continue me generate Number one, mortgage to among yield valuations to with explain. supported will of is United demand which yield,

Reserve then Agency Bank its attempts model in securitized these supports yield experience there also is the finance And brings sustained and investments a will business finally, the the need for the housing the favors Dynex States. for cash Next, more for need housing final long-term RMBS, long-term Furthermore, that reduce expertise demand factor capital in a as private in Demographics believe assets. population system demographic support as in world's our significant that is managing the RMBS. U.S. to Federal United we ages.

Benedetti wrap to in with the going will those at facts turn Smriti the So it the talk you come just I'm and portfolio over openings, you of to detail, then overall and give to end – back the about to up. macro more Steve Then call quarter. I'll to the about themes our more

Stephen Benedetti

good Thank call. everyone on to morning and the you, Byron,

benefit excludes We a futures, in of in of million approximately $X.XX Just income third quarter. cumulative Eurodollar the $XXX,XXX core economic of on couple highlights. $XXX matured quarter operating this the amount earned quick in the That year. net for which

similar know, for may futures as But those purposes, you were rate core to the we use benefit swaps. Eurodollar excluded. interest of accounting As

in we the For row, eighth dividend quarter and paid a of a declared $X.XX.

X% modestly share from $X.XX Our per around from per $X.XX book value declined or to $X.XX. $X.XX share

total zero. the flat return inclusive at economic For quarter the was the dividend, of

approximately XXX points interest those the versus spread offset leverage, in swaps has in average hedges, at four growth quarters, the over On Smriti hedge comments, RMBS. increases our the we our was four which to spread With basis, billion spread. interest higher leverages averaged I'd quick quarter, last Most adjusted benefits positions. on decline Over rates adjusted the was interest Agency it by of basis the over our reported X.XX% for X.Xx. net like of turn portfolio adjusted short averaged Popenoe. of last This And to Net from reflects our quarter the an X.Xx. and X.XX% portfolio of includes portfolio billion this X.XX%. was approximately cost on quarters, net quarter. the $X averaged last X.XX% in slightly quarter versus approximately average $X this We in an repo

Smriti Popenoe

Steve. Thanks

built over in growth on some balance now, to is basically go held for Central Slide and review Let's starting macro we elevated long-term that global X. of the And I'll our We’ve and limited. on Why? remain is ability economy extraordinary foundations now the the the for Bank global rise this rapidly debt. sheets interest believe rates macro slide First, time. to view what and are the view

global debt Second, in a against rates, we growth, that headwind higher see of itself interest significant is and and inflation. increasing

of reduce to the rates. and tepid to Banks challenged inflation monetary Central low growth continues stimulus Third, be by ability

That's adjustments. They is rapidly why to impact markets In policies global to of considerable global fragile fiscal and in pursuing limited. surprise for believe addition, and tightening factors, our These remain the vulnerable rapid and rates we to long-term events. interest varying ability the make ability continue trade their the growth to policies elevated over into also vulnerable opinion, make inject rise policies. uncertainty

We up of rates global are global in believe having Federal the volatility November, environment. the the now XXXX, rates fed that treasury an and increased since low Now, U.S. cycle, XXX. funds has XX-year have the tightening treasury Reserve a rate sit interest points. adverse range in approaching basis We have a basis though to In election from in and capital prior markets. economy tightening moved effect treasuries basis XXX December, increased on the about have levels are we XXX the XX-year XXXX, And in first between increased contrast points. XXX XXX on since Two-year points.

pricing fed global of economic macroeconomic short-term XXXX. the view future indeed move tied U.S. previously If the near above in to rate the consequences rates XX-year range outlook that fed we is market cycle will and time funds economy. the are data is Due to the sector mortgage fed current period that three the bullish. dependent challenges and the is we of believe cannot any through rates largely meaningful in our on We path for in outcomes. target policy, tightening as the be monetary U.S. end more business the believe believe, to Regarding the I increases is the the for our Treasury negative we stated, general REIT without of

increasing current curve marginal curve investment end, this the reinvestment over provide cycles Even fed, MBS return ROE from leverage. the the relatively believe tightening policy. reasonable in its investment the is on market RMBS if reducing yield low-teens remains beyond announced ROE these yield at the currently opportunities. stems MBS return As risk spreads steepens, of low. its We flat, opportunities in Agency concerns very the possibly Part typically

explain view, strategy let macro now our this Given since XXXX. me

increases XX we per in of a return interest economic XX% share total of basis. the done despite what on a rates, cumulative $X.XX have and $X.XX is quarters, This nearly or paid dividends we've posted XXXX. Over last share per since

allocate capital First, willing assets. and we've our risk return adjusted earned highest been the to from income

allocation and able being track In in sectors out opportunistically. move has to a Dynex of record fact, capital consistent of

As returns rate environment. from we XXXX, best high and to securities this more hybrid liquid the in risk better recent XXXX ARMs one less of for with liquid XX-year fixed examples, prepayment with transitioned

consider particularly that these an fatal having as severe Second, investing today, the no we today. risk. has credit upside, potential, we profile late many cycle longer in investments business holding Historically, on in you business to limited basis incremental downside found have mortgage but proven rated lower in leverage liquidity the a return view REITs, asymmetric strategies when

flight be neutral and a The creates interest in duration regulatory positions rates have to for unwilling have a and exposure a high to number the take fixed inflexible position today rates. even down or historically with moved risks as the to potential been income degree avoided risen. high Third, to continue strategies operational we with associated overhead and covering markets short short have of interest short risk. the of quality illiquid we rapid Four,

short our liquidity much down, we flexibility, by were position limit that participants ignored our many duration treasuries particularly rapid was such market very from So derivatives, neutral. are believing financial drain severely move a if would

per it liquidity willing because Finally, been fed the duration share now to value when we there environment to or we that believe book earn we is pauses strategy. grow appropriate will opportunities in investment summary, long up this Byron. back I’ll for multiple have be over the eases, believe the and in up income turn to In credit in and future. remain

Byron Boston

you understand very for I'm how we the think. to beginning of repeat you important it’s you – that So want at we what I kind because going told

We opinions. cycles we thought and the haven't on very methodical adjusted through multiple arriving disciplined our our in as process. We're will

me let it you reiterate again. give these to key points. to want So I

cycle opportunities our to generate in striking We continue distance are provide the We of tightening to we on improve investments. believe the feds expect of a diversified with will solid capital. high we flow returns liquid portfolio quality end that of cash

We are the of the business excited about prospects model. long-term

financial are is approach long-term a periods important looking to of on the transparent, appropriate ourselves disclosure. asset which allocation understandable we beyond to running a take things strategy to highest business, that a solid pride the cash the We necessitates and shareholders It appear with our generating earning our then when have return and remember investments calm. for liquidity. with track we be long our And from record a credit finally, assets quality in happy flow most

We holding personal in we and are very positioned how owning comfortable we're portfolios. in are our confident stock and Dynex

call So can – open Q&A. operator, we the for turn it the

Operator

of And Hagen question Instructions] from [Operator Eric comes our you. Thank the first from line KBW.

is line Your open.

Eric Hagen

Thanks. and I guess, guys. on, opening question nice Great. always to the Thanks Those comments. are with is My hear first from just you really for expenses combined risk.

about expense relative and vehicles? offer taking more? to risk like do an a leverage I just the up think given do to weaker along I the ratio at value, how higher Dynex which lines, just ratio its mean the about and value mean, even think same guess, I – has how your bit, the of the for investment injecting you other pushing time, taking expense up think you efficient more mean, offers return ratio the including into has to expense model – As this just do how I risk up shareholders, arguably your about or picked and you peers that differentiation, that book ability then

Byron Boston

maybe to going and point it we've ability you take year model. guys I'm I we years, portfolio business had Probably, in – told the in something of half, almost been terms our ago. to our the two Eric, So leverage managed. up had a how out a in

really still able taken generate. we at up haven't notice, you to We all. it If been

been decisions just leveraging to We sector, global risk career. pile disciplined in repo is believe I sector we rush believe going financial better my on to emphasize, financial to decisions, a than better. XXXX that made So We leverage the – is in is on leverage. very We willing this credit the highest most take credit throughout system highest most globe support with much ton the a again, of to has quality in not very, And it the believe I'm financing higher better. equality the am liquid assets. risk, and the this

point. first the So that's

next the never are largest to - guy we point, this Now, be never the in Chartpoint industry. is

last to returns a just We think diversified a be and REIT. make opposed a trying understand, and you pace we've slower or blasting generate away the our portfolio. So billon shown to differently. XX sure nimble our pride And we at to moving We're $XX as it XX want ability rush I from over become and years. to shareholders

no have tell to there. be advantage some years to took limit CMBS you we me probably take of ago, We desire our let will loans. non-performing – ability It sector the IO, the CMBS would eight of advantage of: things

NPLs. We’re one REITs of owning the first

the a Mac Freddie K We’re ones owning of one first securities.

of one bonds. first the ones We’re owning DUS

in get long-term, community in may we meaning a become comparison, cycles. that we analyst do want nimble. investors, the multiple maintain to and us look that the can what REITs, XXXX beguiled, we the in business through or about to because think of is why considered the here to because by returns able that and that's make short-term we REITs the out level the will over top such back We’re certain you And what turn long-term that you, And our talk will long-term. And about outperform to anymore. the they're were ultimately the not XXXX

the Look returns. So in the to in trying I long-term Size it's it disciplined, returns. in over methodical moved at grow We're very Look the manner we'll REIT be differential business. to the business We We any continue hasn't to long-term mattered. along. to think largest never the get a grow and think cost. time. at important

largest In also fact, zero, is at XXXX. the long-term most looked return for negative in Well, investors along REITs we their probably them.

where about in cost the So and at XXXX, out guys exactly difference. ratio. there's investors cost a these And size where marketplace made go the other largest a them has the this in take then go a days show and and then back lot comparing conversation overdone. returns ratio made of the long-term It's look to Long-term XXXX, and and guys people and get largest the back now – difference. say,

Eric Hagen

Thanks that. Thanks. commentary. the for Thanks for

Operator

Our Douglas next question of the from line Suisse. Credit Harter comes from

Your line is open.

Douglas Harter

spread the about there so up fourth to to willingness the your talk to Agency in take in Can given seen widening And of appetite, those the MBS portfolio sensitivity and size far quarter. leverage take that further we've your of increased Thanks. spreads? given you kind advantage wider

Smriti Popenoe

Doug. Sure,

Byron Boston

let Smriti, on it XX Hey, out Slide point and XX. me

the everyone main really to We're trying of we keys coming one again, as call transparent this as Doug, So understands. to did was are we to possible. sure be make trying

XX XX our show Slide on So our presentation, and we in are. sensitivities you what

to adjustments the understand happening you, of track our on So a we business. a to be roadmap this XX book is value going not any But XX book value. in a have value try There's environment. your that before lot we financial You institution. what's what's Slide today? hey, around is funky able fashion Book volatile move to make says, to volatile such with give know and yourself you anyone will for really to our

Smriti if more your into So point out to to let stands, go anyone where That's book value roadmap. Slide get to I'm But the and know to details. I just going it wants really please wanted to XX XX. that

business. of into what's You'll understand be quarter and to happening throughout the able that use year to book next to this

Smriti Popenoe

hasn't on changed And you then XX that that substantially. can Page quarter-over-quarter, just also see sensitivity

sensitivity as of So And the $X of kind average earning equity. specifically to the right balance, I it on sat you XX, a billion, Page spread percentage then think can see at Doug.

does end. basis basis something points spreads spreads are So something like maybe around quarter mortgage like our in since XX points, X out estimation, maybe

of of it's what can the basis XX% about you XX was do – that's guys I point here. substantially than that's And move end math. So quarter. at mean, it the but not different last the

Byron Boston

credit reduce going balance spread liquidity you it's sheets. in then to some in a to about attempt to our the be talk widening Banks – when widening weather asked their will as up best Spread place up for to spread about Doug. And Central in widening, try been we opinion time is and

we and the it Banks all do view just So say ability without underlying a everything their move don't globally, the skeptical a same reduce believe balance their they much to macro we long-term taking Central direction We too ultimately sheets. toward view, are in from can turmoil. over

However, ready spread we do believe we're that for potential and some waiting adjustments.

the with try And the and to money so back we're to liquidity, in last how carrying much XX carrying we carried the liquidity in deal market. to ability – we’re this have years Smriti, all put

market That putting increase, money book the widen, come the of the long-term. at any value returns So more vantage spreads. type offset real over the us will into from wider volatility will spreads

Douglas Harter

And Slide to look of you your there of the versus XX, sensitivity at then credit, kind if different other. get I portfolio, at guess it, the just of would difference just one than any kind components the of be looking is agency where

Just XX. to of get more on detail Slide kind into

Smriti Popenoe

I I those want whatever IO Yes. cash in part the flow. to of the CMBS clear of we I the one book off credit really is are make is think things that, mean, have the of and position AAA

parts stack. to really or relative the cash So flow it's highly unrated liquid BBB of

So is that come very credit CMBS sector piece to sector. has IO of That incredibly the stable. going remained in book very, our

$XXX So a And sheet. in million or value that in that's total sits essentially. at to been probably has close rock so our balance market

is in. So of the diversification where comes really this the book

so this sector moved has far quarter. in that at not spread all So

out about a which under over book, as to $X Those points or XX $X.X is other X the are pass-through basis I date. mentioned, points, two sectors, quarter XX billion then and to The which billion, basis book, DUS $X little the billion. is about

Douglas Harter

both DUS the about you down perspective?] and of Smriti, impact over in this book book talk IO roll the just [question time the can

Smriti Popenoe

is the in That’s other spread the DUS get portfolio by seasoning. question, that does widening offset

those time flows get As on get spreads goes and the tighter. cash shorter

have that you both classes. marching benefit on of the with time So do asset those that,

recovering some that value time. of you're of from with widening just passage So book the spread

Douglas Harter

books those point, down? of is that roll average of what where we two and kind do on seasoning that Just on guess the stand I

Smriti Popenoe

So barbell. book somewhat is DUS

about is seven the book paper less. and book or would years newer I we paper half say that's is So have the half

and out Doug, to also monetize some of and that you’re So spread the have curve we opportunity get go rolled yield we the down curve. to as able the

So I XXXX and within most the of We at that's the in this vintages. there XXXX, XXXX CMBS not vintages, – most would book, returns XXXX to of an it weren't three years seasoned IOs two it is just us, so say XXXX, point. The sits because advantage. were active probably in for

Douglas Harter

Thank it. Got you.

Smriti Popenoe

Sure.

Operator

Ladenburg of Our next question the with comes Thalmann. from Christopher Nolan line

Your line is open.

Christopher Nolan

IO Hey given portfolio comments to sensitive rates. that, expect we IO comments credit we giving in quarters? seeing on being coming your guys. Byron's the rolloff and the also be peak on Smriti, might Should

Smriti Popenoe

has book a not It We've almost that now a reinvesting been, half. been Chris. for and year

So paydowns is. value pass-through in we we've taking think either where those just in relative market DUS reinvesting the the the the based on market and or been paydowns

Christopher Nolan

Great. in your And then interest rate Byron... outlooks

Byron Boston

Chris? Hey,

Christopher Nolan

Yes.

Byron Boston

us for but Can just to we what it's product. to terms one running I REIT, priced will not I core CMBS continue said. that product the ask mean place us, itself. It add at and of that it is just We thing reprice love you, Smriti me a just for that's just let but the in be, right other that needed

Christopher Nolan

sensitive it's where of are possibility are cycle, comments think in cycle. yield the where sort Also sort for curve? interest the you we in interest rate the also for positioning to in your are your outlook of inverted we would I on Byron, an rate

Byron Boston

to business when whatever of with months steepens, not What place to costs positioned the curve where That's potential inversion. an along I'm I winter these of business, steepens I the the push during months, describing, big mortgage an when model, will months for thing from offset. for the place, it want the be what during We up when is it of winter Whatever takes financial I'm the offset. describing Whatever I of happens that's is can the the thrones business which financing takes call model to in game issue REIT deal the continues companies. has because it. winter fed as it mean

So make to does that sense you?

Christopher Nolan

a final I for leverage my mentioned was do that look guess peak I going and leverage, where guys it's question at how you X.X, or think X.X on you you're what the your quarter? is Yes, peak, is still

Stephen Benedetti

the the you liquid, environment. may risks higher leverage Yes. That and be there high let we is trade-offs adamant further pound I on is table see down effect could policy can at again, time not There near. opportunity sheet. to believe But the is this is anywhere quality become been. assets me times issue we're we for best it points these put today we that just one this And point. out all we generate system but the leveraging believe here you on biggest take haven't of to you may not in balance assets most of is the than to Reserve come tell a stock and until we to income. a an clear really road, the eight for Furthermore, clear leveraged the We better Federal make it's the you

portfolio They're talks runoff. they Janet a about pace. slow security. of will mortgage-backed selling to Yellen, it ago everyone Reserves agency, predictable, a weeks There the are So a decade. doing couple allowing take I say, Federal the not it very heard selling, at are

stock there So is a effect.

So shape, believe has market that's the and is bankers. financial far capital our regulators system system. better central financial the we within quote believe Number more one. the in that I’ll two, We repo and

Xx, at not the this the taking one. methodical type these leveraging we've in securities. rather And bonds highest risk the in take that's with bonds would of And I is leverage some liquid leverage made credit ever going take any and that understood. career. a risks believe environment more they that at to understand, And And So we're sleep most of my comfortable Xx most making then disciplined, night. leverage. always we time believe highly very we're can in okay please better is our point this credit at should than to or decisions. Xx that be trade-off shareholders we that And quality, feel But deliberate, long-term Xx

Christopher Nolan

it Great. me. you. Thank that's Thank you for for the clarification. And

Operator

from next David Our of comes JonesTrading. line question Walrod from the Instructions] [Operator

Your line is open.

David Walrod

Good questions. are pools? morning. TBA Yes. A couple How the specified versus market you viewing

Smriti Popenoe

Hi, David, it’s Smriti.

right come now, the say last would So two. indifferent off market, has going I of the TBA world kind fair amount what a between of quarter. The into the end

Some justified of that was in opinion. our

Some not. of that was

now So into own and new the to of pools we that's as going to the end sort of average, much the market this – Specified right our to pricing risk companies quarter coupon changing security, other smaller. at stack. type for in at now of preferred sort pay-ups the pools us adjusts and that of relative invest the are our risk pay-ups on

become want or the to stayed into a time. the in the from that deliver because dollar specified we like preserve standpoint. minimal either roll want the general assets market flexibility high from pay-up We at does the pools at to some the ability to we've preserve pay-up So in event the the sell attractive to TBA away roll

between us really for more way spectrum flexibility So it could where to issue I'm at right it's almost exist, the this that two us. go But it's and – off other that trade indifferent the either a market, buy in in while us – were convexity point. financial the people's for of – for sometimes minds now

David Walrod

how to the about, talked Okay. you everything and hedging, a your be And – TBA on then your that repo exposure? guys question we hedge be will you given have portfolio relative viewing

Smriti Popenoe

Q or that disclosed in the we in think press I release. the

Byron Boston

release. press the in It’s

Smriti Popenoe

basically I think now, the book versus But XX% is our in repo. It’s hedged over release, press right David.

the being thinking first from up up you're third one-month, of if factor which drag So the And actually because in was year, about the a fourth move second that basis into and the in a here quarter seen in the three-month the big three this in the of months come that quarter one-month, low-XXs back basis, really quarter. benefit three-month we've ended LIBOR.

So hikes next hedging that's and just again. repo with higher about fed XX% again respect Relatively in starting into book our position. come favor going been our if to this to quarter has start or percentage the back our quarter

David Walrod

And In Yes. to XX. to exposure you borrowings X.X you also went more press to release, X.X TBA XX in outstanding your have swaps you're it no Eurodollar to says June note future. average from September

to these use So and we to maintain to X.X back up continue will at just that you swaps expect X.X to X.X towards go levels? should that or

Stephen Benedetti

the there's little TBAs you When TBAs virtually the that. obviously included Smriti Dave was repo, is are the in to up, alluding So the think versus X.X X.X, where I – it's a exclude locked which earlier. to

to We've because forward, explain instruments those use we of for and again we account and them some to position gone Eurodollars them going lengths as the have the matured. point we present hedge you future. could try Eurodollars terms out, how In correctly the in – currently in to we have

here. book the I'll of In here on the hedge book Smriti terms go comment that. from may and from where may swap go let

Smriti Popenoe

ratio, TBAs area. including in higher we're Yes. that keep want mean, David, the or XX% would I to We targeting.

Byron Boston

let comment. higher Dave, add level me And a

seat As my believe one are now, as adjust to expect this to a of see do necessarily won't prepared I rapidly. for truly probable the something talking be right lot that do I'm I'm And to and I because team that to I it. edge than the people the – in that's position it markets my I'm am opportunity looking of approached so leading surprises today. sitting highly yield curve am way these I

curve highly thinks events going to capital there's curve It's invert, Someone stay flat. everyone the curve probable invert? what global is because if going so asked the many could that thinks you surprise surprise to global the earlier, will Everyone happens that it's markets. the

given whetted We're as one idea, on necessary. process. edge not our we're longer term hedges adjust macro thought to So to our any

we the edge sit on seats, looking So of manage book. our our to dynamically

Smriti Popenoe

Hey, as there's will starting forward goes that is on. swaps time change that the that on piece Dave, last percentage that

percentage coverage of current swap and that Okay, in one start the pace level so swaps it’s different. then the once include will future, have

just table through So as look that can guide swamp we you you that maturity through and can well.

David Walrod

Okay. Thanks guys. I it. lot a appreciate

Operator

question Trevor JMP Cranston Our from the next from Securities. line comes of

open. is line Your

Trevor Cranston

the Hi. extended in questions we talk my on Thanks. the you and have do agency already. more to the XX-year, range? I Thanks. Most move up something portfolio. point much this like risk how if portfolio, the assets say incremental extension terms in of your guess how been you think are But further remains covered see to about, at were Can XXX of one

Smriti Popenoe

Sure.

point all terms to for that rates on have. would of thing the I sensitivity what extension, on you is all book again, the interest it you the the relative mix up, going combined position Page So One of again, to right. rate in XX, depends

book consists view rates. view view X.Xs. of Xs, your obviously very upon predicated and and the of is is extension And on of much Our Xs your curve your

fully point, coupon at this one or be at the ended price. me because that extended trading it of would where hard to not up par scenarios for through is So something all say $XX lived extended fully we’ll

them point. duration, durations some So clearly tell the you is right to sort X.X very, can't very still coupon with being fully But and tell that relative of isn't or as that you cautious we I'm going Xs long-term just something now the extended. that very the again, Xs as say And on we're anything potential when think our view extended. about of But its the I at book, I on fair stop durations. can X.Xs extension maybe maybe I or that's means Trevor, fully you durations that's go. that that to view if hedging just our I can to that. our this almost like tell

Byron Boston

to of having you on portfolio would paper Agency look XX-year then last That's why with no And is not our that you portfolio. risk us book showed think if commercial us actually portfolio extension remind expose keep within large a to some presentation, were of I CMBS the book I'll part Trevor a RMBS our quarterly And what CMBS we the has a in diversification business. all we risk. that examples the like totally extension you show of versus place

Trevor Cranston

That makes sense. yep. Right,

Byron Boston

let different And extended. these And one Trevor, out say, analysts. fully by – different I've thing point this securities just then mortgage because they'll portfolios read in the mortgage well, me are other

get durations know word Xs. people The will vary. can say surprised. I They'll the no. answer are no. get on You surprised still The most what, there that is, would

I – XX, you surprised think X.Xs if on think than you'll I up and or is dropped the But X.Xs. and most did will they and X.Xs more coupons Xs than you potentially. on they people and your get I think even Xs a more be lower will below that's move the have rates your surprised where really

rate that’s based movements. on my experience fast So of

Smriti Popenoe

Especially, specified a if you own large amount with that that… pay-ups, pools of high

Byron Boston

forever highest I that's the an great is level old securities extension this to of point in they important see I especially the the recently and Smriti in and was This biggest Really, don't XXXX want and really I the and made. baby-boomer, movement. sound another surprise trading but that like because rate XXXX how a took started I at the marketplace point coupons in place lower and or much where am.

Trevor Cranston

comments. Q&A helpful are Thank interesting you. and Great. of Those End very

Operator

questions to further no call at are time. this Byron back turn the There I'll Boston, you.

Byron Boston

thanks a We points a us. here. we of We transparent a to Hey, couple very again And be emphasized really straightforward. believe we and joining for simplistic want do everyone strategy. have

have to our We important That's value whether us of any not. understand or adjustments to we the any us, appreciate year. Thank add just or forward results, to you. you funky don't ask tax at look and exult what the us you joining the you or to made can end us. joining back you book is so you If we'll money

Operator

today's concludes call. conference This

disconnect. now may You

Dynex Capital (DX) 31 Oct 182018 Q3 Earnings call transcript