Net comprehensive income (loss) return on average common equity for the period was calculated by dividing our comprehensive income/(loss) available /(attributable) to common shareholders by our average stockholders' equity, net of the Series A and Series B Preferred Stock aggregate liquidation preference.
Economic return (loss) on common equity represents the sum of the change in our net asset value per common share and our dividends declared on common stock during the period over our beginning net asset value per common share.
Average leverage during the period was calculated by dividing our daily weighted average agency MBS repurchase agreements and debt of consolidated VIEs outstanding for the period by the sum of our average stockholders' equity less our average investment in REIT equity securities for the period. Leverage excludes U.S. Treasury repurchase agreements.
Average leverage, including net TBA dollar roll position, during the period includes the components of "leverage (average during the period)" plus our daily weighted average net TBA dollar position (at cost) during the period.
Leverage at period end is calculated by dividing the sum of the amount outstanding under our agency MBS repurchase agreements, net receivable / payable for unsettled agency securities and debt of consolidated VIEs by the sum of our total stockholders' equity less the fair value of investments in REIT equity securities at period end. Leverage excludes U.S. Treasury repurchase agreements.
Leverage at period end, including net TBA dollar roll position, includes the components of "leverage (as of period end)" plus our net TBA position outstanding as of period end, at cost.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of American Capital Agency Corp.'s consolidated financial statements with a narrative from the perspective of management. Our MD&A is presented in eight sections:
Summary of Critical Accounting Estimates
Liquidity and Capital Resources
Off-Balance Sheet Arrangements
Aggregate Contractual Obligations
The size and composition of our investment portfolio depends on investment strategies implemented by our Manager, the availability of investment capital and overall market conditions, including the availability of attractively priced investments and suitable financing to appropriately leverage our investment portfolio. Market conditions are influenced by, among other things, current levels of and expectations for future levels of interest rates, mortgage prepayments, market liquidity, housing prices, unemployment rates, general economic conditions, government participation in the mortgage market, evolving regulations or legal settlements that impact servicing practices or other mortgage related activities.
Trends and Recent Market Impacts
The fixed income markets performed well during 2014, a sharp contrast to the extreme interest rate volatility and price deterioration experienced in 2013. The consensus view at the start of 2014 was that interest rates would continue to increase and that spreads on agency MBS versus comparable benchmark indices would widen as the Fed exited its third quantitative easing program ("QE3") and began to tighten monetary policy in response to improving economic conditions. Quantitative easing refers to the recent buying by the Fed of U.S. government bonds and agency MBS in the open market, an aggressive and historically unusual method of expanding the U.S. money supply. However, despite generally strong U.S. economic data, the global economic weakness and declining inflation expectations both domestically and abroad led to a significant decline in interest rates across the globe. In addition, the shape of the U.S. Treasury yield curve changed significantly during the year, as the yield on the 10 year U.S. Treasury note fell 84 basis points while the yield on the 2 year U.S. Treasury note increased 29 basis points.
Also, in contrast to consensus expectations, agency MBS generally outperformed many other fixed income products, despite the gradual reduction in the Fed’s MBS purchases and the significant flattening of the yield curve. The strong performance of agency MBS was driven by a historically low volume of newly originated mortgages and by fixed income investors generally being underweight or underinvested in agency MBS. In addition, agency MBS benefited from the Fed's ownership of approximately one-third, or nearly $1.7 trillion, of the agency MBS market as of December 31, 2014, which has materially reduced the outstanding tradable supply of agency MBS.