The risk management actions we take may lower our earnings and dividends in the short term to further our objective of maintaining attractive levels of earnings and dividends over the long term. In addition, some of our hedges are intended to provide protection against larger rate moves and as a result may be relatively ineffective for smaller changes in interest rates. There can be no certainty that our Manager's projections of our exposures to interest rates, prepayments, extension or other risks will be accurate or that our hedging activities will be effective and, therefore, actual results could differ materially.
Income from hedging transactions that we enter into to manage risk may not constitute qualifying gross income under one or both of the gross income tests applicable to REITs. Therefore, we may have to limit our use of certain advantageous hedging techniques, which could expose us to greater risks than we would otherwise want to bear, or implement those hedges through a taxable REIT subsidiary ("TRS"). Implementing our hedges through a TRS could increase the cost of our hedging activities because a TRS is subject to tax on income and gains.
Trends and Recent Market Impacts
U.S. interest rates declined in the first quarter of 2015, consistent with the general decline in interest rates across the globe. The yield on the 10 year U.S. Treasury note fell 24 basis points ("bps") to end the quarter at 1.93%. Despite the modest aggregate decline, the intra-quarter swings in interest rates were extreme by historical standards. The yield on the 10 year U.S. Treasury note fell 50 bps in January, increased 60 bps in February and early March, and ended the quarter with another 30 bps decline.
In the fourth quarter of 2014, we made several changes to the composition of our asset and hedge portfolio that were intended to mitigate the negative impact of volatile interest rate environments, such as what unfolded in the first quarter of 2015. In particular, we reduced our exposure to higher coupon, generic agency MBS; lowered our net duration gap (the difference between the interest rate sensitivity of our assets and that of our liabilities and hedges); and reduced leverage. In the first quarter, we further reduced our “at risk” leverage, inclusive of our net TBA position, to 6.4x as of March 31, 2015, our lowest leverage level in over 6 years. Similarly, we reduced our net duration gap to 0.2 years as of March 31, 2015, compared to 0.5 years as of December 31, 2014 and 1.2 years as of March 31, 2014. Together, these actions muted the month-to-month fluctuations in our net book value and limited our aggregate net book value change to a loss of $(0.21) per common share or (0.8%) over the first quarter, despite the considerable intra-quarter moves in interest rates. As a result, economic return for the first quarter was 1.7%, or 7.1% annualized, based upon $0.66 in dividends per common share and a decline of $(0.21) in our net book value per common share.
We believe that interest rate volatility will likely remain elevated due to the countervailing forces of weak economic growth and deflation risk abroad versus moderate economic growth and stable price inflation in the U.S. Weak economic growth and deflationary forces have led to substantial quantitative easing in Europe, Japan, and China, driving some overseas sovereign yields to historically low levels, and, in some cases, to negative yields. In contrast, the U.S. economic landscape is very different, marked by moderate growth, a strong dollar, low energy prices and improving employment. As a result of these factors, the Federal Reserve appears poised to raise short term rates despite disappointing U.S. gross domestic product, or "GDP", growth in the first quarter of 2015. The divergence between global and domestic economic forces has created significant interest rate uncertainty. In addition, more onerous regulatory requirements and unprecedented central bank intervention appears to have reduced bond market liquidity, further exacerbating interest rate volatility. In light of these factors, we positioned our portfolio in a manner that prioritizes risk management and book value preservation over incremental short term returns.
Looking ahead, if interest rates decline, we would expect prepayment speeds to accelerate substantially and agency MBS spreads relative to benchmark interest rates to widen somewhat, possibly adversely impacting our net book value per share in the near term. In this falling rate scenario, we believe our portfolio performance will benefit somewhat from our sizable position in assets that possess favorable prepayment characteristics and our relatively low coupon profile. If interest rates increase, we would expect agency MBS spreads to tighten in response to reduced supply and prepayments to slow. In this scenario, the benefit to our net book value per share stemming from strong agency MBS performance would be offset somewhat by hedging costs associated with rising interest rate scenarios. For the estimated impact of changes in interests rates and mortgage spreads on our net book value please refer to "Quantitative and Qualitative Disclosures about Market Risk" under Item 3 of this Quarterly Report on Form 10-Q.
Given our current defensive portfolio positioning, we expect fluctuations in our net book value to be more muted than they would otherwise be and our economic return to be driven primarily by our dividend in the near term. Our conservative risk profile also provides us capacity and flexibility to grow our portfolio quickly through increased leverage if agency MBS weaken and expected returns improve.
On April 27, 2015, our Board of Directors declared a monthly dividend of $0.20 per common share for the month of May, payable on June 5, 2015 to common stockholders of record as of May 29, 2015, a decline of $0.02 per common share, or 9%,