DX - Earnings call transcript Q1 2022

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Operator

Thank you for standing by. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dynex Capital First Quarter Earnings Conference Call. [Operator Instructions]. Thank you. begin may you Griffin, your conference. Alison

Alison Griffin

with operator. joining us you, XXXX the Conference release SEC Good filed April issued Capital morning, for all Earnings associated press The XXXX. you this thank Call. call today with Quarter was and and First Thank today's XX, for morning, Dynex the

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

of may you on we Reform statements forward-looking contain continue, current we identify words statements. expressions call assumptions to assume, this Before plan, and company's expectations projected the certain and to Act Litigation date estimate, and currently differ those the and of only factors this as some subject considerably forecast, by anticipate, our forward-looking The a forward-looking beliefs, and external events remind predicted the are uncertainties, Securities quantified. statements that These applicable information to of of or be us of These inherently begin, XXXX. result timing meaning believe, available those risks from of statements forward-looking results within expect, similar reflect cannot and unforeseen based or are will risks. are as project, conference could forward-looking contemplated wish Private of statements presentation. actual which The

on slide under Investors may Reports found or factors can well streaming a be being our our also be SEC's to website. as broadcast refer the through on This The Internet the disclosures slide the presentation live please with Investors of information the the a on call found on may website. page. link risks, Dynex SEC, on is with additional webcast which these homepage website which For be as the Center conference Center quarterly referenced filed presentation, under over

Steve Benedetti, my it is and call Officer. Investment President Financial Chief Co-Chief Executive Co-Chief now and Officer the Officer; with Boston. to Byron turn Executive Vice Chief Chief Byron on is and that, me Investment pleasure Smriti Popenoe, the call President, Officer; Joining to Boston, Operating Officer and over And

Byron Boston

and capital book common a average of see while on return generated can XX.X%, has maintaining and There's the for the total And you, indices to quarter quarter am first market see years, income since these differentiated to an management. It's rapid a return first X. our patient our $XX achieved results I January team navigated bond of in X mindset, This returns, period, Dynex economic environment incredibly our reason first risk major team, our the we we Thank you everyone, and per on share XXXX, our around volatile for investing shareholders disciplined flexible a we during In the X. thank the proud earnings this economic skills for seen historically we because all which last macro total skillfully top-down have you in of generated X.X%. Slide that you, experienced is of approach Alison, joining our produced as macro all been returns. call. second disruption our quarter, Slide our as X, negative the in and double-digit the we management, market such which exceptional approach value during fixed can results. as

long-term we with your invest said a view. capital I many times, As

XXXX. XXXX great first crisis, and volatile the XXXX environment, of XXXX now XXXX quarter complex team turmoil has financial long-term capital market XXXX the Our stock the navigated taper the tantrum crash, pandemic most the crisis, many the and, market recently, and including of

these today's of market All complex and volatile maintain environment. lessons from events when perspective navigating historic the learned us help

our success. and macro top-down global Our our focus on our is strategy approach to fundamental

transparent We views views process. the translated sharing and disciplined been market macro consistent investment have into in our these and have with how our

increased flexibility positioned time. We liquidity and with for have some been

opportunities continue intensified expect expect market actions conflict short- corresponding We and unpredictability to Russian which period risk, There spreads around to U.S. The has and and the be inflation very well with federal through we leverage. But consequences. Ukraine we long-term We're comes has turbulence on also while returns both our approach, we our extended flexible. beginning to this continues to for and uncertainty volatility geopolitical to of persist mindset will with have remain uncertainty that and sheet positioned markets. time. believe the take credit combat of and increased rates, and of an market uncertainty We generate to invasion economy. measured impact opportunities of and our are remain in long-term to opportunity, also attractive reserve global see the interest balance advantage being

shareholders, investment and most day Steve sound conditions returns. our accretive risk-adjusted generate with experienced will returns people and give you, adjusted and, for have in discipline to you capital regarding out all to ends risk commitment evolve, I are in macroeconomic We our day market that capital and that unwavering specifics disciplined the and to first this to us top-down importantly, to allocation, are strategies starts analysis to on our portfolio environment skilled performance. management to in work expect who our quarter over attractive and more turn you, generate our our have I shareholders. And Benedetti and team that, to opportunities our and call based unique as What protect with principles, disciplined ethical and navigate confidence makes unique with with approach. our of confidence, looking philosophy patience we our want our

Stephen Benedetti

good all. and Byron, you, morning Thank

of rates total distribution quarter. economic Average the increase for share of in quarter, leverage of non-GAAP measure, yields unchanged, Agency Earnings The this yields quarter value which were items Offsetting reallocation for prepayment income largely and increase total $X.XX includes a return during $X.XX was and comprehensive CPR portfolio $X.XX the reported XX versus a our X and earnings common positive points. interest hedges XX basis per fair quarter. $X.XX. the the available book of basis of position RMBS points, an for income into on these last was a yields higher the the during overall financing improved while adjustments quarter, increased increase in due and basis RMBS in available to points increased common quarter. in quarter. primarily return CPR were For $X.XX TBA economic company net an slower share, share income basis distribution TBAs versus per adjusted $X.XX on Comprehensive assets coupons during last. by speeds in The X of dividend of points. spread XX consists $X.XX. of $X.XX $X.XX value $X.XX per X Agency interest-earning the was yields benefited net from while investment of common repo drop

fair these value the available not its As included interest be cost included interest swaps, and benefit changes a value, risk. return, company predominantly do period rate book these reminder, have in to Unlike to uses not a is instruments total the exposure treasury can cost per and for Rather, distribution. earnings that income instruments are to current economic swaps comprehensive periodic therefore share. and hedge or in allocated rate hedge futures of in calculable expense

relative TBA value, value of and yields market share of are per that and rates resulted hedge and assuming spread mortgages during which book throughout and, March XX driver our As on it company our All from curves benefited spreads maintaining also The projected also its asset from $X.XX reflects primarily that and investment in increase that portfolio based the rate the mitigated Agency as book the position fair the company's higher It's to speeds coupon spot book value quarter. and to investments volatility on as value rate the which to as forward forward of spread RMBS assets. the quarter as remarks, Agency and for drives sheet widening on they notional our and interest effective of of as based inclusive a XX% important basis repricing than for note declines common substantial realized CMBS economic relates equal, points our It assets occurred widened. and increase RMBS quarter of prices invested coupon its such, else on-balance allocation date. end hedging existed prepayment reflects XXX reflects interest the our the less the basis the the rates is the lower experienced billion $X.X yield on cost total securities coverage in X% approximately in TBA which of yield call quarter-over-quarter the concludes invested comments principally to substantially on of basis. fair From from positions. quarter. basis first Treasury forward an a value IO. investments approximately perspective, GAAP and portfolio CMBS million, turn amortized due we X% quarter I on $X.X From RMBS mainly with perspective, her a over the Agency our March will return for maintained short U.S. on RMBS and higher as quarter, investments prepared throughout XX, by and billion is $XXX That to increased the a the in Smriti my

Smriti Popenoe

and morning, everyone. Steve, you, good Thank

quarter, The change with witnessed Let XX have in start in trend drive in across to fastest percentage yields historic XX the and largest we yields up into the in an me the XX basis curve. quarter, continues steeper by a moves years. second points first saying the additional yields

with and detail remarks. will more book I in discuss environment, at holding in these that our which be a moves mortgage seen of the historic tightening spreads not rapidly the widening XXXX. rising of thus this on fastest years. that far quantitative These We in seen ending rates . rate XX-year Agency We to brink a portfolio to since Xs since We've X April. in $XX.XX on were in $XX.XX a X%, value were in invest right XX and a and sustained $XX.XX a in the the environment. maintained option-adjusted we also coupons: over to in in we're levels focused accompanied believe have in RMBS, by manner Agency UMBS XX entered and haven't interest saw the repriced RMBS opportunity last levels place rapid first March cycle between increase nominal X.Xs We in XXXX We felt my quarter to

responded that from mitigated This spreads we've substantially this spread have quarter higher widening position the coupons. widened, and but Xs As lower in by all in entire of adverse UMBS coupons, moving seen coupons lower impact our particularly into we've coupons adjustment X.Xs. TBA across

buffer to our post-pandemic government is economy a massive global of the impacts when face the in theme remains, surprise that of to liquidity turning phase, macroeconomic the outlook. also and fiscal the policy the driver from that consistent been has infusions for transition volatility, aggressive the which probability were is main stimulus. will emergency direct bumpy the consequence of pandemic, believe factors team to and be of where phase, returns. increased government policies Now The elevated markets. prepared the used overall We Dynex in ride we the The

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understand It's is think the the time contemplated tightening wider they go could market on expect providing capital than the levels as an returns to alternative quantitative versus sheet, the opportunity because is step Now noneconomic it private also viewed amount pace we will ripe a market. opportunity. this of the are than messaged and credit-oriented declines. important higher good been leader their widening now market. at impact and to the XXXX to powder support in the that a as has have secondary MBS conditions very historic investments. the not balance to The for saw at that believe the back quickly The we is any wider believe a structural in We of We is pricing tightening, quantitative see in. significant amount it. We've to being anticipate consistently spread can investment done capital the XXXX, mouth. first are in why preserving our Reserve, the shareholders' by have will that stepping the widening GSE From earn a in we The short MBS XXXX. returns, value a let flow of supported us, agency-guaranteed we higher already we date, has and point the as buyer, dry XXXX, own me incremental levels was environment risky this also fewer with invest. a spread. significant a we opportunity. from of turn sustained Dynex. they're through cash be behind We And wide ultimately to job by majority that portfolios book this This is for cycle burst in possibly a MBS desire positive back of believe it spread U.S. for attractive unlike largest the going Yes, we of investment of Federal Fed of current Fed we MBS on,

with million liquidity. positioned are over available $XXX in We

capital X be deploy will factors. driven decision Our by to

still of on necessitates macroeconomic be attractive believe overall wider that unexpected This we to decisions vulnerable And at today, of already environment, prudent opportunities better shocks. which while to we overall the our level levels leverage. the which, First, second, provide mortgage the view expect. spreads spread may

financing given coupon XX% balanced already or position complexity the and maintain even second curve expect here, that higher higher exceed the standpoint, holdings different rise add are for to level available with rates And and a to therefore and today's a environment X.X% ratio strategy. additional we've global able We rapid the rates distribution experienced, to From in in we the of from more implied on to dividend we the diversified by of turns that to the in of earn leverage as for in our about calls of quarter. the be RMBS Agency X me Let X X.X. portfolio that to move now either XXXX. hedge the we balance sheet, for that X earnings costs the be level of chance forward an portfolio with the for the go interest or lower see to at

be part ratio the remain over quarters. hedges against managing historic this long cash in through We've in our curve, looking performance of widening. the favorable in stand we solid spreads as in rates. We and of to stream the we're that into to move more expect in deploy now coming rise this forward building in We're we return flow at deliver believe cushioned will the term. hedge ready Byron. the and XX-year a widening While very capital significant active the the environment, a to I'll to strong and be us our positioned position to of experienced to successfully we've managed the worst it turn more book

Byron Boston

performance. over return preservation choosing the relative for money our total performance be thing capital, on these cash sector, done positioned generate factors said this big investors. management of should our Dynex our capital. on is Because focus be assess dividend the best believe What in also Smriti. and investors. performance believe the team history. of Capital your past our types the portfolios many moment how extremely you, our for when now while risk we that we the I quality shareholders our we years have portfolio in preserving yield X above-average economic Thank of hedge have consideration key ability calls that to of well is to on or should We I've an to the is Dynex capitalize in for demonstrates invest

that if your a preferred your running you're consider Dynex your portfolio If strategy in an dividend average above and help you're diversifying endowment our portfolio can XX-XX yield with stock, meet annual common an income traditional draw either portfolio, needs. investment or fixed leads

If management retirement, asset Dynex need you are the investment so can in retirement opportunity. approaching trust over an term, or can Capital unique offers you that team simply enjoy long you a you life.

We those management capital the strong importantly, long-term for and, our lines I unanticipated record game Operator, are and us. join this shareholders, team yet a to us preserving of track with an navigating current are values, shareholders, with who environment. you a plan to market existing a to experienced ethical core mindset, open very journey. To please for stay not you encourage Q&A. And Dynex I on invite the

Operator

Instructions]. [Operator

question Suisse. of Credit is Doug first The Harter from

Douglas Harter

on for the available spread up. spreads congratulations only your just good increased only widening points comparing that XXX just quarter. -- you of XXX the to talk a through return. only show Can of and performance kind book why value returns kind sort the bps? look potential spread of you off, you're the at returns the First saw, follow of levered I showing basis widening presentation, that you despite wanted guess I in If I widening

Smriti Popenoe

Sure.

are, the is higher quarter So interesting the on returns that higher. the coupon migrated I current One what of distribution respect most the current And the and things identify change happened to coupon to coupon. as think the has the that's depends is coupon over you what with pick the in right? it

think is if like. driver terms now, it, big That of right that So the about actually coupon current a X.X%. you looks what is return marginal in

coupon So the take function only over basis of the overall in It's that price a return. as that has and simply from point changed wouldn't our the perspective, XXX last a quarter. I what $XXX how is change

higher in you'll by distribution look really the the amount. see total, the coupon that actually appropriate at you returns If are

-- So quarter-over-quarter. X% probably X%, close X.X% to

Douglas Harter

Got it.

Okay. can widening That that us in somewhat produced little And quarter. is talked book any kind coupon it the value all kind you know positive was I kind guess return spreads a more of kind you I give of a navigated you the of color and distribution, of helpful. of bit, how still but

Byron Boston

I'm to Smriti to going let micro start Doug, going with I'm any follow details. and up

I [indiscernible] disciplined XXX, very all So on is and because a best literally we that anticipated the a to thought shareholders we've you process probably thing disciplined XX to opinion about could about way we And here are the position -- curve, points been portfolio sat with patient gave and And basis literally from go our it's the that basis view spreads. started XXX done about for up think yield XX I of calm, approach. we remaining the time. gyrating points. our the about the XX top-down and at about spreads, rates, mean XXX We we back to still about yield you to ride curve, about But -- XX-year.

time. a capital a the tell there's said all patient, disciplined on because been that anticipating We're going You'll you to be and listen recall other our to one management same shareholders back this been talk portfolio disciplined. steeper very hear calls, so, all with so. back, Smriti, deploying open. I We've is patient, specific overall short year of and delivered we going been this literally, do is know, symphony, you opportunity. We of the a this I leading can that a movement theme. you did literally, long-term we the being to if curve, very perfect we're music And add where disciplined, best of yields, details. this. one spreads. to time the believe we've higher to more very is calm, you having make thing us We to move calm were of We've wider my deal. you're as don't if very And you goals couple a for don't not we believe from like raises. look better But to We and the next capital shareholders also or the entire those go some enjoy want to the very

Smriti Popenoe

just perspective, more really When understand detailed the is. we X about of that ratios, the things. duration you duration very making a Doug, on our say our hard It's it's predict security talk it's of to hedge what really what would I mortgage sure mortgage security is.

the we So but skate do those said, that things some terms. scale think how work. to art amount and And we Wayne takes some of skate one amount puck of and of the we don't is And to understanding is you to -- puck about Gretzky think you mortgages duration the I in it where going is, be. where

So of it hedge do you use is ratios. and part hedged How you hedge. what do to

So that's the yield curve. across positioning

asset our I to it was lower saying great. above respect coupons, lower in coupons think all the with of allocation, it's did

by of XX-year is thing curve, talking curve, through about off yield but carry the had be period. to that it's not Our served in with It's And then assets. in part the macro really been leverage we've us mentioned, hedge in look, selection well. low there's this much so was think sold And this as view. all driven obviously, a Byron the popular a I part when the line really all along has

of things X here. us kind together those get So

Operator

question Securities. Cranston is of Trevor JMP next Your from

Trevor Cranston

the now. looks quarter. some talk quarter. rates look coupon. it was about in coupon in more could of on about up to guess particularly below It coupon the up movement a I rates pick of I some probably move move yield book like assets, within by there'd You up the most your substantially continuing could have as bonds amount portfolio during thinking was is I when curious seems in you be and of in second to if context you maybe the it's stack the large the continued positioning market discount you're like higher the how effective the curious about talked guys portfolio you at yield

how just guys about curious that. So are thinking you

Smriti Popenoe

is Sure. think below I'm coupon, is typically, premium, a par going interesting things at but Yes, a entire stack really right? you're one about that's So when you're most in moving of from coupon happened the not. or you almost the discount up to par,

shifted in higher this our take last up a entire coupon quarter TBA me different widened ways. we've coupons. as let the spreads of position couple is in So One

I second think that distribution, idea yield. us we've book marking more okay? essentially that the are of assets. se. per view respecting preserved preserve we could coupon a just there's NIM leads want Every bonds about I the say we and balance the rates forward percent really on from those to here, more And diversified how don't what book balanced think at from to yields have on Those would to sheet you we're really $XX, now market here market. thing discount, sit value, because go quarter, is that's a The our $XX price they're a X-ish that

are assets coupons One the refinancing really those okay? lower at prepayment and these X That's going cash in going driven what So a movement out point of is, to turnover. be, things. on by speeds depend out to this is

lot we're watching something higher So the to to are this out coupons. to we just of we -- those to gauges watch say, is feel relative dollar like right And positions our prices those month are these you par. paid pools a about X worth last CPR own, guys XX when X X and we that's of portfolio the X.X, and now, get need to that below that know, points the so

to an we married the But the by coupons. be that means watching. higher I coupon as And starts no those watching opportunity something we're from think there do will positions. feel to step away up we're So that's to go that. in for Fed And us

about to the think put ball think is is about really the call and on-balance sheet other coupons side side. option. ball them call on as we like an The both way low elevated the Swaption and option

on have positive portfolio. now, that So the these are there right are carry -- we call option

We're appropriate when And say very these had so of feel day are. to prices looks where watching at every things at these forward positions comfortable temporary. of this in point, we are terms single good. We've all get out it's would I the obviously But NIM hedged. The them.

it's to at So relative now going the really forward. about going this be point value

Trevor Cranston

it. Got

in of can paydowns pay-ups talk to That this about sense. potentially you how invest makes And versus guys looking or at how down pools spec terms about leverage, as TBAs given come you're are much thinking have increase Okay. point? you

Smriti Popenoe

Yes.

some So kind give coupons the the interesting versus of color lower it's thing on -- about higher specified bifurcated pools, you I'll between the just coupons.

come getting they've versus Xs higher just side, but to come as reduction in those because down, for Xs, the down. so dollar But the in the are you've pay-ups still pay-ups percentage those that's X.Xs prices dollar say the above, that premium the coupon appropriate come on the is the through that and coupons, and and side, lower. instance, have TBAs on much seen massive prices down about have So coupons you're I of theoretical premium, same. actually

a those expensive relative TBA. So look little to

reason. this really a be I coupons, stayed attractive. kind the The think where of more TBAs pay-up they've start we higher coupons, low already, Those gotten still you go. the are the up. look that might And for bit in guys beat world know So in going low little we to to

the because $XX seasoning that are coupons The starts to is that's bonds now, that have matter. price you in happening other the thing $XX, lower

because to nice seasoning start have to And pay-ups count. so will the a you really buffer

cheap. we're and look this pick we're right say happy think positions it's cheaper X.Xs if at up to I TBA spec protection the lower we'll a little still really versus we coupons would and pool in point, and have bit specs. So Xs with But the indifferent we call better, below, look above, now.

Trevor Cranston

Got it.

you an Do of thing. since Last how Okay. quarter? has end as estimate guys book value to the have moved the

Smriti Popenoe

Yes. comments $XX.XX my that of I mentioned we've April. in and far $XX.XX sitting on -- thus been in sort between

Operator

Your from BTIG. of question next Eric is Hagen

Eric Hagen

great Congrats quarter. on a

TBA. the on follow-up a Just

Just a the on follow-up TBA.

on as dollar responds X.X the perspective Just want roll the down to get draw how the Fed that your and the portfolio. in the starts to X and

Smriti Popenoe

question. that for you thank Eric,

drawdown. Fed's a it's related. Well, it's partially So I less the would of say function

So in of come That's is the expect to stops to all as coupons level the those the to those bigger going buying be see rolls The off, definitely you Fed case. start rates. right? coupons, the would driver

actually X Fannie has directional. you in just It's so, come last ticks. or the rolls week down really in So can Xs see the

So very play difficult it's and it's lock game. of -- to that sort thing a in and

Fed So buying. it's less it when than I was the sustainable, would say, was

less level is the sustainable, is volatility increase. can would the So this you But okay? So at to those in going say The there, hit these dollar carry right rolls rolls. it's from point, the steps I more on very as going these deep the a specialness bid sustainable for that bid Fed you have in away if Without is be going a buyer. a without production. production, away, not to rules

point. at less just it's so And this sustainable

Eric Hagen

color. conditions across also That's but high. hedging futures, Right. of think instead maybe hedging -- to approach the want about replacing side, the helpful the change with would need would market to of suppose to with sense you then staying And And your on swaptions kind the I to like I for how look volatility get just what they curve? relatively what potentially the order in

Smriti Popenoe

Yes.

flat curve, think I a have this we to the point, because hedges think yield at factor. way that's pretty a about the

thoughtful the be you where more more respect level we'll individual have think on to we swaptions, I about here comments really is neutral be tough We've this think -- to of say, The right? the the second we it's rates, just that inclination said the when that the relative the more of would ball. I overall our level curve. be, direction rates. to on So factor need at think a of approach in With and to would the about balanced point, points

at a at everything of there's discount to this a swaptions. with point, So need less use

So not we we're about kind like or to of in as ways other think ball, to else. moment. And to buy have at right, married spec swaptions something the pools do continuing

much in So more that's From piece. hedge active managing the are to be here, how another about like of piece we're it. going thinking we

I think we my comments. in that noted

So you're terms in that of right taking up.

from on our to positioned to we're you don't that curve be level have have of be at in it's rates certainty to to of tell X-, positioning and yet a do X-year of be. know to here me say going I book X-, have out. our going going view book For part how balanced this it's the the the more to point,

Operator

question of Your Bose next George is KBW. from

Bose George

just on I And you I Smriti, the up X%, think, returns. are ROEs discussion to back wanted incremental go to of sort suggested that X.X%.

So current just ROEs just are can given leverage? you just talk levered about your where

Smriti Popenoe

Yes.

So seeing will leverage. about going tie forward that coupon, return I depending implied to the the as the pick, you X.X% hedged depending and So somewhere the and that day, between include, margin, already already the on include all right? XX%, returns the we're to going is the the XX% on curve. financing our by on that that up -- it costs say I'm they interesting depending hedges to on current not necessarily thing

And you is like So other right? reason here, to has The great want sustainability, more that's telling don't these. not the it's noneconomic buyer to might why the and they're stepped is reason, XX% historic. is own they shakes that we but the sound historic XX% say of away stepping this away, it largest

for ability to about. be that want for the you some really is there these other the So thinking returns piece time be to

XXXX, that's So XXXX. spreads levels not of have other seen we these since here. the piece mortgage And

I important think that's understand. to

say mean, the of in about would So the you possible I I that returns mid-teens XX%, to see definitely current XX% volatility. within to we

Byron Boston

not in returns, it's we're got risk-adjusted a what ask in actually long the it's over that rise rates turn you in these very that's -- when then, making true companies in wide think is, these anticipated, them add in mean that Smriti out Dynex, the you're different very levels, liberal well, as at we said, are higher we're calculations. And hold to conservative term. the have what's gives process. these solid a challenges to because -- their at very we disciplined of their are all one assets and going opportunity to about very And you calculated make looking important exciting the create be are built returns. we returns fact, Like when financing is and return. when you some costs. And And in calculations. they I fact, assuming And I when there, you factors of better anything, If if, than to about on risk those be

the So want philosophy you understand I the return just behind to numbers.

Bose George

again, Okay. quarter? discussion. Great. great That's helpful. And book the then quarter. was just with into And actually duration the back gap I this job going that see the What value to

Smriti Popenoe

way hedging don't extension think for about to were is that And think the Yes. would was had risk and hedges say both. X.Xs. present disclose that we the the Xs what And the assets did we really that look I We on. in way positioned the don't I relative it thought were the own hedging -- extension that we we was to were for we risk. We we

do I say to This risks cetera. this is hedge et important really like and so And want controllable durations, make we talk because about ratio point.

happens value where widening. difficult call when hedge. direction, want together. about your assets One of or And right? your of and goes asset are treasuries versus going what to to I your the much and an return of duration are when a same in hedge spread down, treasuries thing moving when actually up That's how as your dissecting accurate spread -- as you drift really things possible when most be widening But portfolio interesting true manager hedge from in your on the price those being days things MBS goes is -- came

quite Xs duration the X.Xs Treasury. they the to our going extension with move to assessment correlated on and we for was was going were risk actually way So felt move or the like

appropriately So our hedge adjusted that. was for ratio

because it's your We metric, it how doesn't you or from So tells spot it gap think that's XX tell duration I what going duration would you think about today, to is move -- it's basis how a now. duration about is it. your really XX points don't a real

And so that security sense of sense. in it might give you a false

Byron Boston

the And be, managing that's skating then, comment Gretzky's your a mortgage-backed very comment with [indiscernible] portfolio. Smriti, tied where to earlier, about will securities back important puck in

If are, closer where to X%. on [indiscernible] all probability, a [indiscernible] believe we is XX which is be we you going to basis are points the the that

they another XXX duration securities mortgage-backed points. your about think the basis if to as where would to need is be actually You up XX-year

Operator

Your from next Christopher Ladenburg question Thalmann. Nolan is of

Christopher Nolan

Back ROE to question. the

leverage. seems could you're Given what levered the and in leverage? seeing you're appreciation It to have motivation your and book targets you that value your on you're ROEs hitting much your are like target, dividend your covering increase without

Smriti Popenoe

given on cost that put I to have level, When relative of if the to step macro kind would it you environment, of think opportunity, about this the would And think at the the returns, we we that. is capital. Chris, environment. be risk-adjusted that think opportunity I assets -- accretive an into

Christopher Nolan

see So time time, you leverage some XXXX? in remains assuming some can the market increasing your volatility in the

Smriti Popenoe

Yes.

Bitcoin, as the And risky quarters I credit, assets think have crypto, would March respect to or say few of liquidity drain in, way. coming. price about that's us the year, important risk think everything, of mortgages quantitative assets I going led heard reprice. probably going comes really last with to And to as it you've be right, June like equities, tightening the adjust in adjust the next are to is going how are to

there bumpy done of to will could that and So right, and there be In to this work in deserves good macro capital frankly. some at quite ride. bumpy we be of a the environment put levels? chances -- to really expect has be lot this Yes, respect, context some global that that

in. returns These the we're doing We're our we're capital. thoughtfully, what is we it yes. prices done. can in. rushing I not take people to what think relative us And important is evolve? Do to being of So returns Yes. do judicious good leverage money we've critically we put cost to the X next these about we to with will the are expect up? respect think always do X when And quarters Opportunistically, how

Christopher Nolan

the dividend up, dividend? an increase supplement? on returns be Any what's go the Would assuming in the it And that? or do base dividend thoughts on thoughts the

Byron Boston

matter very of of say, a I'll cautious said at levels We we any The one start And management. many dividend thing very risk Dividend we Chris, need I've and is our this in point view view. with that moving to strong our be times risk. direction. global before, have the about macroeconomic it a

the for you, just manager one value looking we're the we started our input. it shareholders, product and [indiscernible] more or generate X about I a there's the cash process. about we've into thing to someone then -- book on sheet that then complex XX%, long-term not first really product we're think different we're yield, for But total to of more And of a shareholders. will I product income. we're you talking yield if when just term, say unbelievable a emphasize X for here And while you offering gives think view we history. income for protect Capital. because is We're dividend where risk, is is not into stock prepared and and dividend an preparing we looking you this not to long one it. looking from it now. tell return total the looking where that We're you're think total in very so first good we're let It some if the years experience I person. one ago, of will good And leaned your And that different we trying and give -- just But Dynex generating you're to return We just a there's hope We're that we're XX% our our really me just bad offering give color say, -- preservation. not at value -- We you is ago experience. XX%, the are dividend [indiscernible] We're XX%, input is give it. lay cash return started to balance a to we're dividend experience. out moment want product. this years I XX% that

Operator

question Jason is Stewart Jones from Trading. next Your of

Jason Stewart

really on difficult Congratulations navigating a environment.

I the is Steve, as any we about that any still we're get and early Just very up requirement? dividend limitation the there think income REIT the following payout? on question. year. Or REIT in

Stephen Benedetti

year point this navigate But level, the right in early we to the it But any as dividend see requirements. as at at current like okay point, there. feel now, you be the we REIT still. out, should of we're Jason, pretty okay we

Jason Stewart

guys up, the more what Byron, Is on it is positioning I are way thought just And gets toggle -- guess what recession? level? your it Okay. about perhaps more the those do on then spread minds? story. I X of about side for Smriti, credit in mean Or you constructive a pulling your

Byron Boston

normal normally a that and have outcomes credit And distribution. With on disciplined them think environment you I'm nothing the are you And more that do Jason, that emphasizing our There's you'll in and We're our the as assets. to my on liquidity this the high a like of sheet say I a would liquidity. changing of in man, been you're years to assets in how at when point you our we could point, you and attached of the fat that word we start more us. There that and call to at that presentation, try type I'm environment, macroeconomic many surprise fat-tailed think. tails. macro that's the in those there factors to to taking are for always been going time. risk the start view is backdrop, up like most team [indiscernible] landscape because is expected tail have of have going to about expected position in global credit in now. enormous for them use we to illiquidity remind Again, been credit the the factors probability we've look playing multiple realize up and them We've at view. and view. when I are not credit this channel amount top, an

strong And surprise We after it. for one about so position. surprise another far, prepared this And we're surprise. after very decade, get liquidity another feel our

illiquidity at to more as point. we in move credit. you starting not down do that credit, when talk about to taking ready We're this talk So you're about risk

Smriti Popenoe

a before it's there Jason, also, has reward say begun. risk would think I what is QT we good don't And as

level all market, risk as the the like liquidity where So so down isn't of parts way to I assets and from large the see credit on. price mentioned, of want the would adjust to Fed of supporting cryptocurrency to I've high-yield a

general I know there's here. a element and borrowings. also increase inflation. fundamental, a We price So going got the of in a fundamentals levels coming There's there's to to We've don't think We're that are pandemic. how out out of an okay? play

into historical widened from -- crisis, So is In would made wait-and-see going as a you looked you that colossal correct. the have really financial if I at things had And XXXX. to XXXX, a you into time, attractive think that's stepped a mistake. take approach back would perspective. credit I spreads

when that out liquidity a fundamentals of there's can we're situation of to very, Fed lesson to up of propping are that's wait cognizant and be type you to levels that saying true And the of assets there's repeated, but before to we be underlie really bit starting learned that not So for away. step cash these a that some see artificial here the the colors, the instruments is are there. very as going

Jason Stewart

XX% of you helpful like is getting is me. Okay. stock that probably to down a repurchases, I something close But that just know which is, question today looks for would book, XX% think, entertain? I great Last That's very reflective can quarter. to When trades a as about you color. the we share of remind it to book, think still me,

Smriti Popenoe

investment the brink And back in it, capital. about environment, level want opportunity. of deployed. that can think #X capital. capital we isn't capital. than dividend be can is make way higher shares the cutting We of that of a We of cost list. on on good you market thing we're the to and our think believe think our we the much or We Jason, sort the buying the think the I preserve the we're We telling the historic money,

so to able capital here to in. to be And be needs that invest us for

say wanted if And would else. that's strategy anything our I you don't to that, very add I the here. So to mindset regards strongly anything Byron, know, or with

Byron Boston

to wider I No. be capital want to more to We That say able deploy simple. anything it. spreads. is a have it, I'll don't great job. just

Operator

closing time call to presenters now questions. the allotted turn the I completed remarks. over for for We will the

Byron Boston

for And call thank that who some shareholders, you today this and who to you you quarter. manage and for the will giving not forward with to us Thank point. again. very here other call, being next To at our very, opportunity much are here money. appreciate your look you we to again listen concludes speaking our those We

Operator

This concludes for participation. conference Thank call. today's you your

now may You disconnect.

Dynex Capital (DX) 27 Apr 222022 Q1 Earnings call transcript