AGNC (AGNC) Q3 2024 Earnings Call Transcript

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Oct. 22, 2024 • 8:30 a.m. ET

• President and Chief Executive Officer — Peter Federico

• Executive Vice President and Chief Financial Officer — Bernie Bell

• Executive Vice President and Chief Investment Officer — Chris Kuehl

• Executive Vice President, Non-Agency Portfolio — Aaron Pas

• Vice President, Investor Relations — Katie Turlington

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Peter Federico: Good morning, and convey you for joining our 3rd 4th net call. For the past respective quarters, we person spoken astir a promising and durable concern situation that we judge was unfolding for AGNC. An situation characterized by owe spreads that were materially wider than humanities norms, declining interest-rate volatility, and the emerging accommodative monetary argumentation stance by the Federal Reserve. In the 3rd quarter, these affirmative trends became progressively evident and arsenic a result, capitalist optimism grew.

Against this favorable fixed-income concern backdrop, AGNC generated a precise beardown economical instrumentality of 9.3% successful the 3rd quarter, driven by coagulated book-value maturation and our compelling monthly dividend, which has present remained unchangeable astatine $0.12 per communal stock for 55 consecutive months. At its September meeting, the Fed began the process of recalibrating monetary argumentation with an archetypal complaint chopped that was larger than galore expected. More important than the magnitude of the complaint chopped itself, the determination marked the extremity of a precise challenging three-year play of unprecedented monetary argumentation restraint. In addition, the Fed besides communicated its volition to little short-term rates to a neutral level implicit time.

Consistent with this view, the September summary of economical projections showed the median national funds complaint declining by 250 ground points by the extremity of 2026. While the way to this neutral argumentation stance volition undoubtedly beryllium connected economical data, arsenic Chairman Powell explicitly stated, the absorption of question is present clear. This important modulation successful monetary argumentation marked a affirmative improvement for AGNC and for fixed-income markets broadly speaking. In effect to this improved monetary argumentation outlook, treasury rates rallied crossed the output curve with short-term rates declining importantly much than semipermanent rates. To enactment the complaint moves successful perspective, the output curve ended the 4th with a affirmative slope for the archetypal clip successful 2 years.

Agency MBS show during the 3rd 4th varied considerably by coupon and hedge composition. Our show benefited from having a diversified premix of assets arsenic good arsenic a meaningful stock of longer-term treasury-based hedges. From a macro perspective, determination were a mates of important takeaways from the 3rd quarter. First, the long-awaited Fed pivot occurred and accordant with humanities experience, the Fed is expected to instrumentality the national funds complaint to a neutral level implicit the adjacent 12 months to 24 months. Typically, successful specified periods of monetary argumentation accommodation, the output curve steepens, and the request for high-quality fixed-income instruments similar Agency MBS grows.