Print Page     Close Window     

SEC Filings

10-Q
AGNC INVESTMENT CORP. filed this Form 10-Q on 11/03/2017
Entire Document
 


repo rates. Favorable implied funding levels and stable prepayment expectations led us to maintain a sizable TBA position throughout much of the period. Our cost of funds also benefited from a 39 basis point increase in the average receive rate on our pay-fixed receive-variable interest rate swaps over the first three quarters of the year, which was partly offset by higher costs associated with an increase in our swap portfolio in conjunction with our larger asset balance and an increase in the average maturity of our swap portfolio to 4.5 years as of September 30, 2017, from 3.9 years as of December 31, 2016. In addition, we achieved a greater diversity of funding and benefited from more favorable terms than traditional levels by shifting a larger portion our repo funding and TBA clearing through our captive broker-dealer subsidiary, Bethesda Securities, LLC, or "BES”. As of September 30, 2017, our repo funding transacted through BES totaled 30%, up significantly from 12% as of December 31, 2016.
As of September 30, 2017, our "at risk" leverage was 8.0x our tangible equity, up from 7.7x as of December 31, 2016. Additional Agency RMBS spread widening and ongoing favorable funding dynamics, could provide attractive investment opportunities and serve as a catalyst for us to further increase leverage.
As of September 30, 2017, our interest rate hedges equaled 92% of our funding liabilities and net TBA position, up slightly from 90% as of December 31, 2016. We believe operating at this level provides us a significant amount of protection against net asset value fluctuations due to interest rate changes. Our net "duration gap," which is a measure of the risk due to mismatches that can occur between the interest rate sensitivity of our assets and liabilities, inclusive of hedges, was 0.4 years as of September 30, 2017, down from 1.3 years as of December 31, 2016. The reduction in our net duration gap is a result of our larger hedge position and the overall decline in interest rates during the first three quarters of the year.
Market Information
The following table summarizes interest rates and prices of generic fixed rate Agency RMBS as of each date presented below:
Interest Rate/Security Price 1
 
Sept. 30, 2016
 
Dec. 31, 2016
 
Mar. 31, 2017
 
June 30, 2017
 
Sept. 30, 2017
 
Sept. 30, 2017
vs
June 30, 2017
 
Sept. 30, 2017
vs
Dec. 31, 2016
LIBOR:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1-Month
 
0.53%
 
0.77%
 
0.98%
 
1.22%
 
1.23%
 
+0.01

bps
 
+0.46

bps
3-Month
 
0.85%
 
1.00%
 
1.15%
 
1.30%
 
1.33%
 
+0.03

bps
 
+0.33

bps
6-Month
 
1.24%
 
1.31%
 
1.42%
 
1.45%
 
1.51%
 
+0.06

bps
 
+0.20

bps
U.S. Treasury Security Rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2-Year U.S. Treasury
 
0.76%
 
1.20%
 
1.26%
 
1.38%
 
1.48%
 
+0.10

bps
 
+0.28

bps
3-Year U.S. Treasury
 
0.87%
 
1.46%
 
1.50%
 
1.55%
 
1.61%
 
+0.06

bps
 
+0.15

bps
5-Year U.S. Treasury
 
1.15%
 
1.92%
 
1.93%
 
1.89%
 
1.93%
 
+0.04

bps
 
+0.01

bps
10-Year U.S. Treasury
 
1.61%
 
2.43%
 
2.39%
 
2.30%
 
2.33%
 
+0.03

bps
 
-0.10

bps
30-Year U.S. Treasury
 
2.33%
 
3.05%
 
3.02%
 
2.84%
 
2.86%
 
+0.02

bps
 
-0.19

bps
Interest Rate Swap Rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2-Year Swap
 
1.01%
 
1.46%
 
1.62%
 
1.61%
 
1.73%
 
+0.12

bps
 
+0.27

bps
3-Year Swap
 
1.07%
 
1.68%
 
1.81%
 
1.74%
 
1.84%
 
+0.10

bps
 
+0.16

bps
5-Year Swap
 
1.18%
 
1.96%
 
2.06%
 
1.95%
 
2.00%
 
+0.05

bps
 
+0.04

bps
10-Year Swap
 
1.46%
 
2.32%
 
2.39%
 
2.27%
 
2.28%
 
+0.01

bps
 
-0.04

bps
30-Year Swap
 
1.78%
 
2.57%
 
2.65%
 
2.53%
 
2.52%
 
-0.01

bps
 
-0.05

bps
30-Year Fixed Rate Agency Price:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.0%
 
$103.95
 
$99.38
 
$99.15
 
$99.88
 
$100.33
 
+$0.45
 
+$0.95
3.5%
 
$105.53
 
$102.50
 
$102.29
 
$102.70
 
$103.09
 
+$0.39
 
+$0.59
4.0%
 
$107.41
 
$105.13
 
$104.90
 
$105.12
 
$105.27
 
+$0.15
 
+$0.14
4.5%
 
$109.52
 
$107.51
 
$107.24
 
$107.27
 
$107.33
 
+$0.06
 
-$0.18
15-Year Fixed Rate Agency Price:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5%
 
$103.56
 
$100.20
 
$100.03
 
$100.53
 
$100.69
 
+$0.16
 
+$0.49
3.0%
 
$104.99
 
$102.62
 
$102.51
 
$102.64
 
$102.75
 
+$0.11
 
+$0.13
3.5%
 
$105.41
 
$104.17
 
$104.06
 
$104.06
 
$104.14
 
+$0.08
 
-$0.03
4.0%
 
$103.73
 
$102.69
 
$103.29
 
$103.44
 
$103.13
 
-$0.31
 
+$0.44
_______________________
1.
Price information is for generic instruments only and is not reflective of our specific portfolio holdings. Price information is as of 3:00 p.m. (EST) on such date and can vary by source. Prices and interest rates in the table above were obtained from Barclays. LIBOR rates were obtained from Bloomberg.


31


© AGNC Investment Corp All Rights Reserved