AGNC Investment (AGNC) 22 Oct 242024 Q3 Earnings call transcript

Good morning, everyone, and welcome to the AGNC Investment Corp.

Third Quarter 2024 Shareholder Call. [Operator Instructions] please note that today's event is being recorded. At this time, I'd like to turn the conference call over to Katie Turlington, of Investor Relations. Please go ahead.

joining Corp.'s for Earnings Quarter all Call. you AGNC Third Investment XXXX Thank

format. I'd to the of their such statements intended the to This Actual and we safe without change statements factors of recitations like Before and begin, harbor this XXXX. All constitute fact, review by the Securities made extent are as and be those All forward-looking to to provided differ Litigation notice. presentation could slide due beyond AGNC. only of Act historical presentation, from are the in the conference corresponding of are safe Private presentation impact outcomes subject forward-looking to materially contains statements of meaning protection results statements many that, included the within they subject to forward-looking are not this the date the call forecasts statement. control harbor of Reform of

Certain the law. to differ factors reports the that could Commission. obligation those Securities at AGNC's on SEC's forward-looking sec.gov. and any statements unless Copies filed statements website included forward-looking contained disclaim We periodic with the Exchange our to by in from materially available are are update cause required actual results in

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

over will Federico. I Peter that, the call to With turn

third our Good call. for morning, and joining you earnings thank quarter

rate and an materially and Federal that believe we the the accommodative by spreads environment quarters, policy was historical interest last unfolding monetary emerging volatility were promising the several spoken environment AGNC, by have we than declining that about stance characterized Reserve. mortgage norms, for wider investment For durable a

favorable result, which XX quarter, the process In the unprecedented recalibrating very At September Against investor monetary itself, meeting, strong became share the return book policy dividend, of the cut important monetary its for in magnitude backdrop, X-year than solid AGNC initial $X.XX marked has generated More of the a a of by that as our and at rate policy a rate was very apparent. increasingly this remained growth optimism stable now third began with Fed months. fixed trends third the driven income positive grew. economic end And X.X% consecutive period an per value monthly compelling than quarter, common investment many of expected. of the move the larger challenging restraint. cut these

to the rates short-term Fed also a time. intention neutral communicated level addition, In lower over its to

summary Consistent end points XXX economic XXXX. projections the with this declining of view, by the median rate basis showed by funds federal September the of

stance neutral policy the direction While the now depend undoubtedly stated, monetary will a explicitly as in on clear. to the yield this of is income significant development policy path transition economic across rates. Powell This rates than data, policy positive with long-term treasury marked response this curve Chairman broadly to In and for improved rates monetary more fixed for AGNC travel short-term outlook, significantly markets, declining rallied speaking.

the by perspective, with yield the the composition. Coupon slope years. curve rate positive third MBS a in the during in the put quarter ended and performance for X considerably Hedge To moves quarter time Agency first varied

takeaways couple of well diversified treasury-based assets quarter. important mix a a having longer-term as macro third perspective, share there the as were of from benefited of a From performance from a Our hedges. meaningful

demand the the over to of yield such First, expected Typically, policy XX the the the a fixed monetary in grows. for federal rate occurred income periods Fed MBS is long-awaited level experience, neutral instruments months. and like to return high-quality Agency and consistent Fed next accommodation, pivot with the historical XX curve to steepens funds

narrow quarter that environment important in trading the takeaway MBS is place range the spreads aggressively relatively volatile same favorably the other monetary remain existed year. to to highly from Fed compares has Agency range very that for while now spread This policy. close trading the that a tightening The been in was

treasury and MBS, monetary stable As investor wide MBS a rates levered and when to hedged return opportunities most swap and policy Agency less Agency spreads volatile. favorable and in are AGNC's interest when are and are rates

a be the in Much return well as environment MBS year. transitioned more dividends value which Agency which net would trading stance, an of asset in to the however, per paid narrow through that spreads anticipated first significantly, in of monetary we as ability spreads the did per the of asset performance our the meeting. value common stock the stock was wide stable. change the and that are We X months follows to it been share eventually environments period. it at return over includes the AGNC's has total XX.X% That year. Similarly, where our common our This months range very year, X.X% once our same our economic relatively net dividends the generate over common share, XX.X% policy With reinvested was modest exemplifies with attractive returns X accommodative a net Fed this relatively increasing asset also this September stable. type emerge with value the would first case

believe spreads ahead, the belief balance. in supply our the MBS Looking predicated range. the view on This demand we scenario trading is and for current in likely dynamics Agency they that that reasonable part is in most MBS for remain remain Agency

is in decline term. MBS Given increase intermediate Agency supply the it over rates, the the modest somewhat will recent possible of mortgage that

yield demand fixed reduces large to balances income accommodative a is to side, as mutual market the fund and curve, for demand that the monetary money biased short-term however, indicate historically interest increase high-quality On steeper onerous regulation less assets bank Fed the policy, rates. us

in better given the the are MBS Agency financial and remain XXXX path long-term that decidedly MBS volatility outlook of smooth spreads will outlook, and the Agency was the XXXX, and inevitable, economic for Fed the While of is never perfectly and stable. interest it current expectation stance relatively rates of than markets is our periods today

will now turn Bernie detail. discuss I greater Bell financial to to in results that, the over call With our

Peter. you, Thank

For return the dividends equity $X.XX common per had and of increase on total tangible per income or AGNC tangible an the share our share. declared of book comprehensive quarter, X%. X.X% of net comprised common $X.XX $X.XX Economic for was per third value quarter, of share in

last dividend net as of equity accrual. Leverage per from QX. tangible as our October about end modestly late tangible quarter our monthly decreased of share was after X.Xx to of for book common X.Xx deducting As about quarter for X.X% X% value down week, or the

billion portfolio was Additionally, from Agency quarter at tangible we our our $X.X of for narrowed interest from by $X.X spread the billion the projected with $X.XX averaged X.X% declined decline About as that consistent to the in spread approximately interest or net which XX% up and MBS share $X.XX X% with rate June or basis in billion while very $X.X decline quarter. unencumbered half concluded our the our a largely CPRs quarter X/XX. Actual life the at of was equity, income of quarter of XX. roll reduction XX just net result slightly the common to average low-cost cash which per during as quarter, the points our points basis of in pay-fixed rates, to Net spread, XX% dollar just driven a by quarter. of tangible matured for over increased in equity for and the of XX.X%, end average coupon The up X% by unchanged QX. above for XXX was for CPR swaps interest portfolio of X.X%,

next additional We quarter scheduled no the swaps second mature have until to of year.

interest the in decision reduce to decline and hedges our are our to was not of which due reported further of our our use spread. captured half other swap-based treasury-based hedges, increase net The

the our $XXX Lastly, premium through of the million in we issued our for accretion The benefit significant stockholders. stock issuance of material common common book drove ATM third equity substantial was the the with offering program. value price-to-book common quarter of increase at-the-market consistent in throughout our and quarter,

the to agency to call provided positive the favorable new backdrop that, the capital. And of with a mortgage addition, Kuehl market. In over for I'll this the turn investment Chris discuss environment deployment now

during economic dovish assets throughout Thanks, steepened the basis constructive XXX dramatically X-year with provided XX-year backdrop points, duration and outperformed for declining third XX basis rhetoric and Weaker and treasury risk a Fed and yield yields MBS respectively. curve quarter. corporate Bernie. treasury indices benchmarks data The increasingly the credit and Both points quarter.

yields end higher was demand quarter favorable activity which was decline lower These contrast, the and comprised elevated increase an within rates, majority index-based of has fund tenor. last of range tail Index, from coupons the MBS. the a considerably with coupon of a XX heavily led of spreads in volatility of year. housing higher while income coupon Bloomberg technicals MBS coupons lower-coupon as modestly of with pace the Agency points, bond fixed by and MBS. $X.X influenced par MBS, basis in combined The supply coupons points. funds lower in relative of at largely seasonal production-coupon the tightening and type to MBS XX Notably, such, weekly tighter as X- performance in MBS, spread X% double underperformance are lower hedge and to the coupon, of XXXX by outperformance MBS an vast been for third blend X.X% roughly XX to lower-coupon outperformed continued and increase range to treasury with wider. basis drove and billion, year-to-date slightly trading mortgage pace XX-year to in In driven average inflows However, primary

points, XXXX range favorably and of when a compares This respectively. XXXX XX in spreads and coupon XXX par traded basis to

added And result, quarter, as as of to Agency a in MBS. investment During the $XX.X third September increased we portfolio $X XX. our about billion billion

position funding weak we billion composition, rolls approximately most $X portfolio pools in pay-up declined added of levels. were low terms while categories, of TBA relatively quarter, with conventional In the trading which during implied our at consistent in

and Mae was continued curve Repo yield aggregate material of combination an and advantage to remained as swap largely driver tightening. during versus of unchanged of September offer Our implied steepening TBA also financing given Hedge in the Ginnie a valuations positioning funding. position third as XX was quarter, attractive the spread roll performance

better returns. U.S. a treasury-based As MBS longer-tenor result, significantly with generated instruments total hedged

and our hedges. hedges swap-based our decreased increased we quarter, allocation third treasury-based to the During

longer-term continued given further expectations hedge also we this shift yield towards use Consistent XX%. of and policy ratio our steepening. the with to overall curve Importantly, to monetary hedges shift longer-term in our our declined hedges, for increase

protection believe We the hedges posed debt give the growing us and deficits. U.S. ongoing challenges treasury government against budget additional longer-term by

Aaron over to now discuss the I'll turn non-Agency to markets. call the

risk broad-based expectations markets on sentiment August, market initially the cuts, Chris. In shifted of early quarter, faster as By you, spreads rate widened. toward however, macro end pushed Thank higher. the credit

As a unchanged credit to somewhat spreads ended generally tighter. the quarter result,

In index basis the QX, about while investment-grade the points. tightened synthetic to unchanged, XX high-yield was by index close

side, points On basis the Index bond Bloomberg subsequent points. to the IG X quarter and tightened X by about basis end narrowed has cash

the the tightest Last reaching week, levels tightest QE valuations this crisis great in index through and financial seen COVID era. closed the post period during the

have Lower mentioned continue income we we've significant a to households continue distress. to yet of base. fundamentals credit consumer before, As signs but divided show to pressure, see face

Our non-Agency previous GSE portfolio mostly roughly offers composition the transfer due in tender holdings participation our the reduction the million, quarter, for X% quarter at credit ended securities. securities the down unchanged. risk in of portfolio The to from was our $XXX with

historically for environment hand funding to and that, attractive. Peter. Lastly, non-Agency call securities over the With remains stable back the I'll

we'll you, to up With Aaron. open now the questions. your that, call Thank

[Operator from today question comes KBW. George Bose first Instructions] Our from

you to comments the up on on wanted follow hedges. made changes Just your the to first

better that position of this Is you curve the steepening? the does driver? So for sort

in really It's you we've -- it Yes, exactly and XX% a see impact with And now Bose, this about from remarks, mentioned this several ratio down question. that's of the for coming last talked his quarter. this Chris quarter quarters. the prepared right. to great hedge our but XX%

the mentioned, the longer shifted curve. toward hedges part Chris our of And yield systematically more we've as

of hedges XX% hedges that fact, our longer. from think duration are it about X and In come a almost if years you from perspective,

monetary book our with that instruments the we're have with hedge to environment yield time, policy concentrating that's curve will expectation in. steepen So the that longer-dated we're over the and consistent

new with than so also, repricing will ratio some perspective, gain And hedge rate. we, our of the time, operate Fed that us having sense some our from of to benefit now less for XXX% funds over debt to makes a

core it then as that. Great. Okay. makes sense off, obviously the swaps And actually, the on earnings, direction roll the of

should about Just over mean, economic core way time, with is earnings returns. your your the to I essentially is think converge it

generate can you think a end we XX% up? if ROE, where So of earnings that's core kind

a more net this some given they in don't went last quarters. X this That's factors and actually that decline actions quarters the exactly performing the maturing billion Bernie had swap quarter. roll over worth book swaps we our hedge any into we the actually quarter. We spreads. the income than $X.X did spread mentioned to of last dollar because actually mature right. There's lot we swaps of next reduce further swap treasury-based in But really better that, hedges, for were tightening took several a our favor have

wanted includes we on because It hedges. dollar treasury-based that those our and and hedges, spread a have impact to include So roll more treasury-based net it only income hedges. direct has our doesn't

our the on neighborhood net included treasury the income. right dollar on about roll our example, captured it now in probably treasury of is in that be position $X.XX would position, carry fact, carry somewhere not of and that spread In you for if

So not a significant it's perspective, driver. from that

driver fact, dividend not a policy. our In of at it's all

a now. net a the point think of has income for When policy. range would the even express still between XX%. That's hasn't our period income dollar to XX% dividend and you and If are a to new years, the XX% economics, and expect out. It's that above mortgages as long-run on you our you dividend really right in XX% impacted Today, economics I dollar somewhere well also margin about with And net consistent return our of over that. current the and to of it it compression. now of been spread spread roll income that couple portfolio an earnings. our that growth pace and and and reflection compress spread our equity, of equity the and on our speed our take impact roll dollar has net on of roll translates

of mentioned, last X capital For lot has of And the as quarters, we've last quarters. worth over mortgages. raised purchased a example, about billion we have Chris the X in $X

and at portfolio we've around grown and call XX.X%, XXX current our So basis those we're points. XXX on spreads, of mortgage those bringing a between pace at it,

that So driving compression. itself of in some and that of is

not dollar So policy. remains margin it it's very not period dividend interest our portfolio, our net well long-run spread affect net the numbers. They're numbers income. are looking current We're economics nor roll Those number, a aligned. still that and of and our at think our we

Sandler. comes question Love next from Crispin Our from Piper

question. Peter, just following up on that last

Agency you which your your how discuss in spreads on based or Just book value expectations in the return around comments XX% current and Agency can now, right trading expectations and range, the of the mid-teens, remaining MBS then about is to that yield so. compares

think you of XX%, a normalized XX%. mentioned I level

feel getting as near-term about to XX% with you some XX% do the level that here do before dividend benefits So level? have current you the hedges to good

continue I there's the stay same to narrower overall. dividend is good feel of development about alignment important policy range mortgages really Yes. in with We of economics positive really and this that the remarks, just takeaways. portfolio. do our And our the but prepared a fact mentioned couple a my this in

our and being experienced I the the quarters. this. perspective, come levels stable mortgages Chris far the allow us spread for mentioned down. has from like really generate mean attractive And volatility to X wide so first at we've levels importantly, earnings that's

to point think only was If X for point range. that that XXX range. it a have over Compare year, in XX example, about mortgages spread basis traded this you ago, range basis years

toward I to coupon the as XXX to basis of spread sort refer is the quarter are in and this if mortgages current So now position often that moved and a our now, on just obviously range. has points, X point you us comfortable the XXX benchmark. That mortgages middle the management a lot of basis impact at of portfolio. middle the to the years close range. to risk actually appear look end to of does is right XX have range. back around how It in And the of the which to the back that position back we XXX

And a basis blend coupon now. XXX of somewhere point hedges to is the range importantly, current mortgages swap anyhow in

we swaps always a as treasuries and to hedges. always use even we of hedges we're going if like to about treasuries going So XX% in do, we're use now, our of though have mix

think base to XXX about points, translates that average somewhere That's can being they XXX, case basis expectation You in about our stay really ROEs. as that spread attractive is range. this

backed mortgage Great. over quarter, And bit then up your a rates the the third XX-year on expectations just of to intermediate in level term, for rates near in the recent weeks. mortgage rallied

but didn't X%, what are So publicly right here. I on said your curious expect below know curious break necessarily on you've now? you just your to them that expectations thoughts

No, mortgage when for had this X.XX% important point the about market. really a it the the risk recent was of pick or XX-year quarter conversation right risk call, with mortgage If the more example, certainly prepayment so had at the I have it's starting some was for market end to think would the Yes. in vintages. at a outlook the we that up of was because clearly was lot going and it about we of lower, the

slow the now above extended the primary X% backup Again, sort an rates, time. improves for of the general now rate, to a positioned it mortgage primary above But it range, the accommodative mortgage now us significant treasury look. seems stays where this and appears period the well and more Fed, X.XX%, rates backup given that likely mortgages you to at of growing close that in X.X% that mortgage X.XX% is XX-year scenario given the demand down, to of shift. as for rates, treasury really approaching fixed in income XX-year That's backdrop is rate really X.XX% a the really the of are the on depending supply it's X.XX% technicals. Against yesterday, mortgage going of of to the which

market. So of we're it's the for the why so optimistic about part outlook mortgage

Our next comes from question from JPMorgan. Rick Shane

has pretty are XXX. strategically but the spreads widened all, The is, spread challenging book has basis? years do does value a X/XX, the we're MOVE basically quarter, XX days -- backed the impact on XX points. up XX that on gone How the first out laid Look, or basis -- XX from like you weeks. you've to points, how opportunity a X updated basis of what volatile an XX sort what of pretty into It's index

given But dramatic what XX-day the realize opportunities that. again, within a and norms, what short drives term but in And sort I it's moves? we're risks be pretty about we thinking should the move of that

Bernie in backup the value remarks of as mentioned of ended in thanks prepared remarks slightly Yes. Bernie X.X% given -- prepared down the years. of last with the the mentioned book We rates. that the duration end for last quarter positive a around was our treasury week X.X question. in gap

negative a in a backup the our book of little So rates on value. impact had bit

as middle over driver volatility in we I environment But shows towards the is that the right higher a range think near election. of in What back now because mortgage and are we're has simply mentioned, of the it been the -- spreads a it's moving other that. of the I term,

-- equity. of end our X.X% a reasons the ended capacity last risk and of we last perspective retaining some our quarter at an unencumbered leverage the from low quarter very at environment cash with our of this quarter or was was $X.X from for why billion perspective, position position opportunity still XX% management One -- essentially the

But that become election is volatile. the of close rates for so. for here it's get the environment has the This clearly little the as the we're prints would weeks several optimistic. But maybe highest why in remain outlook I next how we've of until for had. takes went election. even that. volatile once backup the income of through the one the get you defensive right, be next that or so to through weeks into we But that interest rate you're did over a that's case outlook couple we election, And related That's and fixed general, month the for going the the anticipate have in to I mortgage more been a we think end, and much to election, or market interest given the the in expect fundamental is. we

Got it.

I coffee. for sorry was another making clearly of I the And apologize. missing cup comments.

That's okay. No problem.

Doug Our next from comes UBS. Harter question from

being election rise? current leverage portfolio Peter, kind of delta just about on about you kind the in size versus of in the thinking of or kind I are flexibility of of kind this kind of defensive, how reducing the guess, hedging, having last run-up the comment kind of volatility of or letting kind leverage to

Yes.

think perspective. were leverage well from we I a positioned

of So -- this delta I move. on anything rate anticipate I don't and do us But environment side. to anticipate typically would do the Leverage such having is do an we hedge the in some

to Our is year. or duration larger than half years in gap, don't even about today over probably neighborhood, much may time. that X.X I for about a be it down something and example, come expect that

active be we'll a on bit little Hedging the So more Delta side.

expect anticipate of don't side. Leverage I again, be fairly a on this, to period the short-lived do having us volatility. anything to I

then clearly, -- and where to and hedges, that How do can it more place some And treasury try in moved hedges? on think and Great. at have makes that And being the point, was capture go? into widened where be. of difference you about SOFR-based move that spreads spread those to treasuries does kind sense to swap better the

as more our treasuries, focus play more and sort of more It over increasing what the the hedges. run deficit, may that our several I'll back the the response talked swap-based of may long sort Chris you're delayed we've right, now, given that start And quarter administration either transition we you or run, the the to opposite the under the we've how market latter mean did and trading. But does. mentioned, in of definitely right us out last on I toward the of swap-based market to shift supply about quarters, with actually longer that do of way election the But swap-based if the the given was hedges. part. But back last recall toward treasury expect hedges. over because for

like with If XX% between have, XX% probably swap-based XX%. it's on to and somewhere we you historically, our of hedges hedges. Today, think average, operate

there over as we in swap the portfolio or shift XX% and the could market get But they're pointed technical, read. difficult right, goes the them. out, very towards very swap-based time point. spreads. So at back be hedge spreads, into to you're you lot will in hedges we in run, swap stability XX% once long shift some rate more over our A But stability

Our next Cranston JMP question Trevor comes from from Securities.

mentioned you you'd some yield you think see MBS. starts comments demand steepen the as little I Fed curve much the a on to bit that you in that in and the curve in prepared to terms the with see some expect Can for elaborate becomes easing, who increased how as to yield the steeper? like kind of in base curve of investor come of to that typically comes demand that need steepness for

not investors going to demand I the come really as expect levered while but do unknown, expect levered not And increase. an see it of demand the unlevered It's they're the we investors some to that investors, share market significant forward. I the from Yes. are there

today X.X-or-so really of over of And will are X%. look coupon like percent the returns been the yield mutual that the be the will enjoying key that's drivers inflows, fixed current the mentioned funds yield income one a There's money over curve. have in obviously high-quality $X-plus of fund market time, Chris of going away. of that really and shape with attractive. Agency bond Those trillion

funds think given income and of equity flow of And fixed opportunity. that ultimately, I money will out yield those the attractive into out

carry yield bank perhaps be in a terms going just over from that's and -- we -- resolution mortgages, get But will occur the thought going obviously to Basel demand, to we foreign endgame. something the it's on of were So perspective curve, time. some the important of expect the we shape do on

indicated third were on but they in been direction. quarter. moving resolution seems that heading toward in very positive a that Fed That the Certainly, delayed, the that to was have late

next that over be the will so. some over So quarter there clarity or

think so a that And bond positive well. for I will as market the be

see the So those are we time. that sources over occurring

comes question Hagen next from Our from BTIG. Eric

Following up [indiscernible]. questions on leverage the

Xx I And your are the to said, raise like right the leverages, maybe a guys wide. curve also mean, to are less raise room upper where you what's that how accretive do could you capital feel your relatively have like now? bound still shape way valuation different You but running than leverage? spreads leverage mortgage benchmark to the you been supports and you and the target little versus maybe the of ability periods right historically has much

there. because bound or Yes. quantification really any by hard And difficult upper lower the sort give to There's you a lot of of in. specific it's bound you're it's that driven the environment

So the it thinking you're lot down and about comes when spreads. really to leverage a matter variables it that volatility volatility comes of rates down your to setting of interest and volatility the

that our volatile is are Spread a driver of book the we highly a spread biggest in you're when business, and environment, And value.

leverage these like wide, spread to wide why in were, X be moves. sufficient mortgage to we we're capacity yourself position when give your brought call, defensive really this in this you had range an very absorb to we back really if is ago So terms a year specifically of on or this up environment spread was

in leverage. that you're that you range you end holds, you gives the range an extent that and higher the As range upper mortgages more to ideal the that's confident gives that on to over ability time that obviously with To I've leverage. has stay been in operate more range to the confidence are of more we quarters. of leverage. the more That, with greater employ trying to last get the narrows, several operate materializing range, higher The been communicate, as confidence more

end are to deploy of lower capital get those you the to a When range, hesitant little obviously more at the levels. we

really of raised lower middle in mortgages capital as they didn't were the were they the actually that the range, when in deploy we attractive third at example, when paused times, to quarter, and For in the the quickly. of capital, range we got and end range,

sort an opportunistic decision. of it's So

confident it unencumbered, experiences rates become the spread which increasingly in with does environment, with with through rate be in. ended with we're short to Once to is And point becoming But where have quarter leverage. then the us this confidence get once we the disciplined interest very today, the elections obviously, get mortgage give have we've something to we interest we over is capacity XX% capital that run. range, had our we're higher operate going as of volatile. That's

That's do stack? raise deploy guys the within yield coupon a that where you or Do additional you helpful. in see the carry And material you capital, really potentially guys stack? expect difference within as to

have Chris a where talk opportunities. Yes. see about little the we I'll bit

Yes.

So the generally long-run offer returns. speaking, Production Coupons risk-adjusted best

they but more risk, are to be that's growing in much more because their the than with holdings, have more spread less course, the upward likely coupon right? they banks wide have would in spreads curve were sloping. securities price. Higher If we tacticals, worse Of think involved prepayment contend

place a Instead, in are produced, the index coupons. now fixed generally income sentiment inflows all higher as being over fund the been has which in whereas is for year aren't market supply dynamic to bond improved, organic that's directed coupons,

likely long-run Peter maybe mentioned, we relative we're to as clarity, offer returns. meantime, likely shift, which coupons will add holdings, and take cuts. I banks into to think time. It time, will their rotate as Fed couple and think ultimately will it In rate of growing and value but the a index, the higher likely coupons more out require relative maintain securities III over Basel the relationships best higher securities lower-yielding start

compelling see coupons diversification certain perspective a Production return That in environments. can and within the provide liquidity also opportunities in said, and be lower benefits speaking, total we But generally from best there are sectors Coupons. that

from from comes Jason Our next Stewart Janney Montgomery. question

specific environment could prepayment Coupons? servicing that on and and how maybe Peter, prepayment view affects the near-term of elaborate outlooks to industry Current current capacity maybe the your you on

address let Chris Sure. I'll that.

Yes, sure.

prepay really exposed So the at had portion last coupons certainly point of a period interesting X we least pretty a to that reports sizable to in the float most the refinance. basis incentive had were XX-plus since the we've higher in post-COVID

rates a percent the little got in the a X% was originated around So small percentage outstanding very float, fairness, around XX% over since of to at But XX%. as down as it mortgage XXXX, back it a of still September. float in when was

XX-plus in We've October. points off since obviously sold basis

that still short-lived. definitely So the incentive observed sharper what year, slower wave to than the we But than mini was we experienced wave bit but quite during response during start what of observed given a last very the around again the what we for the refi a was refi refinance is COVID.

So same words, than the during for bit in COVID. were we for experienced other a peak lower still speeds quite similar incentive loans, what

differences of sizes ago. But I'd too explain We're So clearly some not draw issue weaker The from. longer response system. possibly not that in certainly there but significant refi in we've these sample run, efficiency not an a is in today observed fairness, process say, couple to a only thing far against are any so other capacity response. is short-lived what the than less years betting aggressive the are conclusions the

of lack effect the given sure. flat for less borrowers. products to ARMs A relatively refi curve, a media And compelling like are is one

But response. conclusions the from explanations [ a long-run to it's such short to again, are draw ] And hard TAMR event. so there

Okay. And then high-level question. That's really a helpful.

at at is As to spread just and you of in something between appreciation can XX, for us, snapshot? remind X/XX. what at realizing that we're delta XX measured we believe a sensitivity the points terms the we first, maybe how look basis MBS and that spread I shock, like look that's XX.X% MBS Slide

you point drivers the a put actual just help if maybe that could primary in So snapshot, that would be and between helpful?

entire you just issues look running quarter we're the spread. made of Really, because a that, doing that of value our I shocking benchmark that that in how with coming we're a performance. estimating really when and challenge sensitivity. to investors is I terms one do confusing coupons up portfolio at think this It's maybe replicate bit for each The Yes. book can't little of our simple our and

look, looked to it it you coupon. coupon benchmark, which tightened almost a of like current example, a terms full the richness of or refer we lead results. cheapness, given If by coupon current this lot. coupon in that's down for example, spread often to shifted indications for misleading last I And Like, in because as quarter, a at can

went quarter from at X. the of a to we X So beginning a the

really will a a approach, of sort look you is that a And average benchmark up conclusion. and so with to you coupon in each not weighted do performance yield, to you have at more consistent of the tightening. drop lead have spread with there's What big the to to a correct hedge of economics come

of of at, close the a X and the look points. by to of performance points a you basis couple on performance actually If and tighter quarter by the for Xs actually X basis example, were the last Xs quarter, a X wider were quarter on

way doing was to what that the That's So performance. really that look have we do when sensitivity. the we're at you

look by conclusion and coupon, swaps You treasuries look at there. or performance the would coupon a at each benchmark portfolio, of hedge look it a from portfolio, draw our be to whether to at have it

helpful. sense you mean me. Yes. makes I us to it beat we by No, were That's -- $X.XX. perfect

way the question helpful takeaway. I do the that's we so a it was lot, draw get So high-level thought do it, but I to a Perfect.

Harsh our Street. And final from Green Hemnani comes from question

up bit. increased a explain would The you're Any refi sensitivity help to incentive life where Can of X.X% following that same mortgage the Is Maybe increase the expecting, questions. on trade it, increasing? the color to that you the just there backdrop be CPR expected rates call helpful. it prepayment fees against range? in quite

where in -- increase The were rates lifetime the was at quarter. our CPR of Yes. based prevailing on the interest projected end interest

So interest rates third declined. in the quarter

in coupon. on rates That particular portfolio to our prepayment on of acceleration led each expectation the speeds were lower. based interest Forward also lifetime over our an

forward So mortgage that and are. And rates will every it's with quarter interest where with forward consistent are change rates. rates obviously,

Yes. answers that if know question. don't I your So

of with of of sort current towards continue the the to moving average the coupon, the on also so coupons ticked was MBS bit during The weighted quarters? the Maybe if helpful. then. At think course, the a the of current quarter, we can down next it quarter. just I higher for portfolio expect That's of end coupon. Can I couple consistent has coupon since trend ask, slight Yes. the increased

Yes.

holdings that a down of -- moved We the coupon. X.X% most the mentioned quarter, Chris couple is a As increase in in significant we well, was things holdings little increased last Coupon. that actually our a our in Chris bit actually mentioned. One

in was one environment. to Coupon Coupon. Average now But of our Chris that of up as is decline the inclination So in drivers mentioned, given rate the this move our back

upward some pressure on our consistent to that expect up would with I move Coupon Average So portfolio reallocation.

And ladies and like I'd complete to the gentlemen, back Federico question-and-answer floor for with turn we'll concluding remarks. Peter over today's to session. that,

quarter for I end encouraged very call the year. again mortgage pleased market, joining really We're our appreciate everybody results, at outlook and forward by third our the look to with again, we of speaking today. the Well, all the you to

We And and for presentation. with that, thank ladies conference you and gentlemen, we'll today's call do conclude joining.

may now disconnect your lines. You