AGNC (AGNC) Q2 2025 Earnings Call Transcript

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Tuesday, July 22, 2025 astatine 8:30 a.m. ET

• Chief Executive Officer — Peter Federico

• Chief Financial Officer — Bernice Bell

Peter Federico: Good morning, and convey you each for joining our 2nd 4th net call. Following the administration's tariff announcement successful aboriginal April, elevated governmental argumentation hazard caused capitalist sentiment to crook sharply antagonistic and fiscal markets to reassess the macroeconomic and monetary argumentation outlook. After a crisp repricing successful April, astir markets retraced their aboriginal play losses and ended the 4th astatine amended valuation levels. The show of Agency mortgage-backed securities comparative to benchmark involvement rates, however, was notably weaker quarter-over-quarter. As a effect of this underperformance, AGNC's economical instrumentality for the 2nd 4th was antagonistic 1%.

During the archetypal 3 weeks of April, erstwhile the fiscal marketplace accent was astir pronounced, the output connected the 10-year treasury fluctuated by much than 100 ground points and the S&P 500 Stock Index declined by 12%. This volatility and macroeconomic uncertainty adversely impacted Agency mortgage-backed securities with spreads to treasury and swap rates widening meaningfully. A superior absorption of AGNC's hazard absorption model is maintaining capable liquidity to withstand episodes of important fiscal marketplace stress. One important measurement of this capableness is the percent of equity that we clasp successful unencumbered currency and Agency mortgage-backed securities, which are disposable to conscionable borderline calls successful the mean people of business.

This absorption enabled america to statesman the 2nd 4th with a beardown liquidity presumption and to navigate the fiscal marketplace volatility without contented and importantly, without selling assets. Moreover, we were capable to instrumentality vantage of the wider MBS dispersed situation by raising accretive superior during the 4th and opportunistically deploying a information of that superior successful attractively priced assets. Over the past 2 months of the quarter, astir fiscal markets retraced the April losses, and successful immoderate cases, acceptable caller grounds highs. For example, the S&P 500 Index rallied 25% from the April debased and ended the 4th astir 10% higher. Investment-grade and high-yield indebtedness besides performed good with spreads tightening 10 and 50 ground points, respectively.

The 1 notable show objection was Agency mortgage-backed securities arsenic the existent coupon dispersed to a blend of treasury and swap benchmarks ended the 4th 7 and 14 ground points wider, respectively. Although the Fed and treasury person indicated that beneficial regulatory reforms are forthcoming, slope request for MBS inactive appears to beryllium constrained. Similarly, overseas capitalist request whitethorn beryllium hindered by U.S. dollar weakness and geopolitical risk. Looking ahead, we expect banks and overseas request for Agency MBS to grow. In addition, arsenic we participate the 3rd quarter, the seasonal proviso signifier for MBS issuance should improve. We expect the nett proviso of caller MBS volition beryllium astir $200 cardinal this year, the debased extremity of astir forecasts.