Welcome back. We're getting some breaking news on the Fed front. Steve Leeman joining us with that.What are we learning here, Steve. >> So, what we have, Scott, is a Bloomberg report that the president intends to nominate Steven Mir and the uh chair of his council of economic adviserss to the open seat created by Audriana Cougler's um departure, which I believe is tomorrow is her last day. Um so, he might even I don't know when the Senate has a chance to take it up.That's more of a Megan Cassella question b ...

News just out from the Fed is on the Fed governors who dissented at this week's meeting. Steve Leeman joins us right now. He's got more on that front.Hi, Steve. Hey. Uh, governors Waller and Bowman continuing that tradition of explaining their descents on the Friday after the meeting.And, uh, they're both saying why they, uh, wanted or preferred a quarter point rate cut. Waller saying that tariffs are one-off price increases and do not cause inflation. Echoing uh, speeches he gave before the meeting.He said ...

Hi, Chair Pal. Uh, Nancy Marshall Gendzer with Marketplace. Um, one more question on the, uh, lack of unonymity in today's decision, the two descents.Was there talk during the meeting, I know you're not going to talk about what exactly what individuals said, but in general, was there talk during the meeting of cutting rates and what was the case against that at the meeting. >> Sure. So you know we have we have an economic goaround where people talk about the economy and then the next and today that's yester ...

Hi, Chair Pal. Thank you. Uh well, can you give us a little more about what kind of economic data does the Fed need to see before uh you'll be ready to cut.I mean, do you need inflation back nearly to target. Uh are there other things in the pricing that you look for. Do you need to see weakening in the job market.What kind of things are you are you looking for. I mean, ultimately, it's it could be any could be any of those things, right. But but you know if you saw that the risks to the two goals were movi ...

Policy Watch Global Markets Research Economics - North America July FOMC Preview Research Analysts North America Economics David Seif - NSI david.seif@nomura.com +1 212 667 9180 Aichi Amemiya - NSI aichi.amemiya@nomura.com +1 212 667 9347 Jeremy Schwartz - NSI jeremy.schwartz@nomura.com +1 212 667 9637 Ruchir Sharma - NSI ruchir.sharma@nomura.com +1 212 667 9186 Jacklyn Goloborodsky - NSI jacklyn.goloborodsky@nomura.com Fig. 1: The FOMC will likely keep the policy rate unchanged at 4.375% at the July meetin ...

Financial Data and Key Metrics Changes - The economic return for the quarter was negative 4.8%, consisting of a $0.34 dividend per common share and a $0.76 decline in book value per common share [7] - The debt to equity ratio decreased from 7.1x at the end of March to 6.5x at the end of June, indicating a more defensive posture due to elevated near-term uncertainty [7] - As of July 18, 2025, the estimated book value per common share is between $7.99 and $8.31, reflecting a slight recovery in performance [8][25] Business Line Data and Key Metrics Changes - The Agency RMBS portfolio decreased by 15% quarter over quarter as the company managed risk amid trade policy uncertainty [18] - The allocation to Agency CMBS increased from 15% at the end of Q1 to just over 17% as of June 30, 2025, due to the decline in the Agency RMBS portfolio [20] Market Data and Key Metrics Changes - Interest rates declined across the front end of the Treasury yield curve during Q2, while long-term rates increased, reflecting expectations for accommodative policy from the FOMC [6][11] - The two-year Treasury yield declined by 16 basis points, while the thirty-year yield increased by 20 basis points, leading to the steepest two-thirty spread in nearly 3.5 years [11][12] Company Strategy and Development Direction - The company maintains a cautious near-term outlook but is optimistic about the long-term demand for Agency mortgages due to attractive valuations and stabilization in interest rate volatility [8][25] - The focus remains on specified pools with predictable prepayment behavior, particularly in lower loan balance collateral [18] Management's Comments on Operating Environment and Future Outlook - Management noted that financial conditions were volatile in Q2 but ended modestly accommodative, with expectations for two rate cuts by year-end and additional cuts in 2026 [5][25] - The company believes that further easing of monetary policy will lead to a steeper yield curve and a decline in interest rate volatility, supporting long-term demand for agency mortgages [25] Other Important Information - The company’s liquidity position is strong, providing a cushion for potential market stress while allowing for capital deployment as the investment environment improves [25] - The financing market for Agency CMBS remains robust, with no concerns about deterioration during a widening event [62] Q&A Session Summary Question: How does the company view the relative risk versus reward for high coupon RMBS? - The company believes that spreads reflect the risk accurately and has reduced exposure to higher coupon RMBS due to their sensitivity to interest rate volatility [29][30] Question: What is the company's comfort level on leverage? - The company is comfortable with its current leverage, which is lower than in Q1, and does not feel the need to increase leverage to meet return goals [33][34] Question: What is the outlook for swap spreads and the mix of hedges? - The company anticipates that swap spreads will widen, which would be beneficial, and is currently at maximum allocation to interest rate swaps [37][38] Question: What are the views on core earnings and dividends? - The company expects ROEs to remain attractive, supporting the current dividend without significant changes in the near term [41][45] Question: How does the company feel about CMBS spreads when the Fed cuts rates? - The company is comfortable with the financing market for Agency CMBS and expects spreads to tighten as the Fed cuts rates [60][62]

2.7% is now 3.1%. I'm not aware of that. Yeah, it just came out.Yeah, I haven't heard that from anybody at the Fed. You're including the Martin renovation. You just added our entire capital. Yeah, you just you just added in a third building is what that is. That's a third building.It's a building that's being built. No, it's been it was built 5 years ago. We finished Martin 5 years ago.It's part of the overall work. It's not new. Well, those tensions between President Trump and Fed Chair Jerome Powell playi ...

Market Sentiment & Monetary Policy - The market, including the stock and bond markets, appears largely unconcerned with current political rhetoric and potential policy changes [4][6] - The volatility index is at a level not seen in a long time, suggesting market complacency [4] - The CME Fed funds tracker implies only about a 40% chance of a further 25 basis points rate cut in September [5] - There is a disconnect between the indices and individual company reports, suggesting a potential correction [6] - Monetary policy may take a backseat in the near future [6] Interest Rates & Debt - The bond market has been relatively complacent despite uncertainties surrounding the Fed and increasing debt issuance [7] - The White House desires lower rates to reduce funding costs, envying the Biden administration's lower debt funding costs [8][9] - The zero interest rate policy is over, and funding at the short end of the curve may not be attractive [10] - A 50 basis points cut on $15.5 trillion of refinancing would only save about $75 billion in interest expense [11] - Lowering the Fed rate may not necessarily impact the long end of the curve or housing costs [13][14] Economic Outlook - The US economy is resilient, with unemployment near record lows and GDP tracking around pre-pandemic levels [3] - The market uptrend has been generally unabated since November 22, with the NASDAQ up almost 37% from April 8 lows [18][19]

Financial Data and Key Metrics Changes - ARMOUR's Q2 GAAP net loss related to common stockholders was $78.6 million, or $0.94 per common share [4] - Net interest income was $33.1 million, while distributable earnings available to common stockholders were $64.9 million, or $0.77 per common share [4] - The quarter ending book value was $16.9 per common share, with an estimated book value of $16.81 as of July 21 [6] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $104.6 million of capital by issuing about 6.3 million shares of common stock through an at-the-market offering program during Q2 [4] - Since June 30, an additional $58.8 million was raised by issuing approximately 3.5 million shares [5] - Monthly common stock dividends were paid at $0.24 per share, totaling $0.72 for the quarter [5] Market Data and Key Metrics Changes - The 30-year fixed mortgage rate was near 6.75% through late June and early July, dampening refinancing activity [10] - MBS to SOFR spreads widened by approximately 10 basis points quarter over quarter, remaining historically cheap [9] Company Strategy and Development Direction - ARMOUR's strategy focuses on growing and deploying capital thoughtfully during spread dislocations while maintaining robust liquidity and dynamically adjusting hedges for disciplined risk management [17] - The company is optimistic about structural demand for MBS improving later in the year due to evolving regulatory clarity and a potential resumption of Fed easing policy [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro landscape is influenced by U.S. fiscal sustainability, Fed independence, and trade dynamics, which are expected to weigh on the market for some time [8] - The company believes that a resumption of the Fed cutting cycle this year could reignite liquidity flow into agency MBS [9] Other Important Information - ARMOUR's estimated net portfolio duration is closely managed at 0.46 years, with implied leverage at eight turns [12] - The MBS portfolio remains concentrated in production MBS with ROEs in the 18% to 20% range [13] Q&A Session Summary Question: Managing spread duration risk during volatility - Management expressed comfort with current leverage levels and noted that spreads remain historically attractive, indicating a potential for modestly increasing leverage [20][21] Question: Allocation to higher coupons and best value in the coupon stack - Management remains favorable towards 5.56 coupons, which are currently modeling the highest ROE, while the allocation to higher coupons has declined due to volatility [25][26] Question: Role of long treasury position within the portfolio - The five-year treasury position is used as part of the hedging strategy and as a proxy for Agency CMBS positions, allowing for tactical adjustments based on spread conditions [28][29] Question: Total expenses after fees waived - Management indicated that the higher expenses were due to increased professional fees and do not expect the same run rate going forward [33] Question: Balancing total return versus carry in the hedge portfolio - Management stated that they are positioned for a bullish steepener and are dynamically adjusting hedges based on macroeconomic views [37][38] Question: Expectations for leverage increase - Management noted that they are comfortable modestly increasing leverage given stable liquidity conditions and attractive spreads, while remaining cautious about making large bets [48][52]

Financial Performance & Strategy - Revenue momentum is continuing, delivering against ratio targets set for the year [2] - FICC (Fixed Income, Currencies and Commodities) was up 11%, beating most estimates [5] - The company is pleased to be in a position to increment the originally announced buyback and execute throughout the year, with a base case to deliver on that buyback by the end of the year [9] - The company is managing the company to shareholder value, impacting business decisions, client selection, product pricing, and balance sheet usage [30] Market Dynamics & Outlook - Corporate activity has been chilled by uncertainties around trade negotiations [3] - Corporate finance wallet is down year-on-year, reflecting relative weakness in that area [4] - FX (Foreign Exchange) was very strong, the strongest point in macro generally [6] - There's good activity and performance at the start of the third quarter in both the FICC business and origination advisory business, giving confidence about the second half [8] - Uncertainty around tariffs is holding back corporate investment decisions [14] - There is an investment wave in Europe coming, particularly in defense infrastructure spending, sustainability, and digitalization [15] - Institutional clients are showing interest in reallocating investments to Europe, potentially reducing exposure to the United States [18] - Independence of central banks gives markets confidence in monetary policy [21] Defense Sector - The company is well-positioned to take advantage of growth in the defense sector, with established relationships and cross-industry teams [23][24] - Europe needs a smaller number of defense providers and platforms to concentrate its defense spending [25] German Fiscal Policy - The company expects to be involved in the issuance of debt, holding accounts, financing corporations, supporting households, and supporting investors related to the German government's debt break [33][34]