These summaries are generated by an LLM, but edited by humans.Relatively low today, because nearly half of homeowners sit on mortgages of roughly 3% or less, so rates would need a large rally to trigger widespread refinancing. However, the longer rates stay high and new mortgages carry higher coupons, the greater future refinance exposure becomes, says GAM’s Tom Mansley.Pre‑crisis, Fannie and Freddie hedged large duration mismatches by shorting Treasuries, shorting futures, paying fixed on swaps and buying ...

Overview - The Bank of England proposes to exempt transactions from the derivatives clearing obligation when carried out as part of a post-trade risk reduction (PTRR) service [1][3]. PTRR Services - PTRR providers assist market participants in reducing counterparty, operational, and basis risk in derivatives portfolios through services like portfolio compression, rebalancing, and basis risk optimisation [2][16][20]. - The Bank aims to support financial stability by increasing the efficiency of PTRR services and allowing broader access for market participants [3][29]. Legislative Framework - The UK EMIR mandates that all eligible OTC derivative contracts be cleared by a central counterparty (CCP) [3][10]. - The Financial Services and Markets Act 2023 (FSMA 2023) grants the Bank the authority to exempt certain transactions from this clearing obligation [3][13]. Proposal Details - The Bank proposes that PTRR transactions, which are non-price forming and do not affect market risk, should be exempt from the clearing obligation [27][28]. - This exemption is expected to enhance the efficiency of PTRR services and reduce the complexity for market participants [29][39]. Implementation and Compliance - The Bank suggests that the changes take effect three months after the final rules are published [36]. - PTRR providers must notify the Bank of their intention to provide services and comply with specific conditions to ensure the integrity of the process [34][42]. Cost-Benefit Analysis - The Bank conducted a cost-benefit analysis indicating that the benefits of the exemption, such as increased efficiency and reduced complexity, outweigh the marginal costs associated with compliance [41][44]. - Estimated one-off implementation costs for PTRR providers are approximately £15,000–£20,000, while participants may incur costs of less than £5,000 [59][60]. Financial Stability Implications - The proposed exemption is expected to support financial stability by reducing counterparty and operational risks, thereby freeing up capital and enhancing liquidity in the financial system [52][39]. - A larger network of participants in PTRR exercises could lead to greater risk reduction and mitigate systemic risks in the derivatives market [52][56].

Financial Performance - Net income per share for Q1 2025 was $018, compared to $007 in Q4 2024[10] - Book value per share decreased slightly from $809 in Q4 2024 to $794 in Q1 2025[10] - Dividends declared per common share remained constant at $036[16] - Net portfolio income decreased from $23514 thousand in 2024 to $21348 thousand in 2025[16] Portfolio Characteristics - Average MBS balances increased from $5348 million in Q4 2024 to $5996 million in Q1 2025[14] - The weighted average coupon of the fixed rate MBS portfolio increased from 503% at December 31, 2024, to 532% at March 31, 2025[43, 47] - Economic leverage ratio increased from 73 in Q4 2024 to 78 in Q1 2025[14] - Liquidity decreased from 105% in Q4 2024 to 78% in Q1 2025[14] Hedging and Funding - The weighted average repo rate was 446% as of March 31, 2025[51] - Total notional balance of hedge positions was $(47328) million[56] - Interest rate swaps had a notional balance of $(39093) million with a weighted average pay fix rate of 329%[56]