Financial Data and Key Metrics Changes - The company reported a loss of $0.29 per share in Q2 2025, compared to income of $0.18 per share in Q1 2025. Excluding realized and unrealized losses, net income was $0.16 per share, unchanged from Q1 [5] - Book value decreased from $7.94 per share at the end of Q1 to $7.21 at the end of Q2. Total return for the quarter was negative 4.66%, compared to positive 2.6% in Q1 [5] - The company maintained dividends of $0.36 in both quarters [5] Business Line Data and Key Metrics Changes - Average mortgage-backed securities (MBS) during the quarter increased to $6.9 billion from just under $6 billion in Q1. The leverage ratio decreased from $7.8 billion at the end of Q1 to $7.3 billion at the end of Q2 [6] - Prepayment speeds increased to 10.1% in Q2 from 7.8% in Q1, while liquidity rose to 54% from 52% [6] Market Data and Key Metrics Changes - The market experienced significant volatility due to reciprocal tariffs and the passage of a major bill, impacting the overall market outlook [8][9] - The U.S. Treasury curve has been steepening, which is significant for levered MBS investors as it makes hedging positions using swaps more attractive [13][20] Company Strategy and Development Direction - The company is shifting its portfolio strategy towards a more concentrated production coupon bias, moving away from a barbell approach. This strategy has been beneficial in the current steepening yield curve environment [36] - The company expects the investment environment for Agency RMBS to remain attractive, with production coupon spreads at historically wide levels [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the economy despite challenges such as tariffs and high mortgage rates. They anticipate continued strong economic performance driven by government deficits and spending [26][99] - The company expects refinancing activity to remain low due to high mortgage rates and affordability issues, which could make higher coupon assets attractive [24][70] Other Important Information - The company raised $140 million in new equity during the quarter, which was deployed into higher coupon specified pools [45] - The funding environment remains stable, with ample liquidity and no issues in adding repo counterparties [47] Q&A Session Summary Question: Increase in shares and capital raising strategy - Management confirmed an increase in shares due to a capital raise and indicated that future capital raising would depend on stock price and market conditions [54][56] Question: Premium risk in high coupon pools - Management acknowledged the premium risk but noted that the prepayment experience on lower pay-up pools has been favorable, suggesting a cautious but optimistic approach [57][59] Question: Updated book value - Management provided an estimate of a 3-cent decline in book value quarter-to-date, indicating ongoing market fluctuations [65] Question: Outlook for prepayment speeds - Management expects prepayment speeds to remain muted in the third quarter, with seasonal factors influencing the outlook [68][70] Question: MBS spreads and interest rate expectations - Management discussed the potential for MBS spreads to widen or tighten based on economic conditions and emphasized the resilience of the mortgage market despite challenges [91][96]