Dynex Capital(US:DX)2025-07-21 15:02Financial Data and Key Metrics Changes - The company's market capitalization as of June 30 is over $1,500,000,000, representing nearly 50% growth since June 2024 [8] - Net interest income continues to trend upwards as new investments with attractive yields are added to the portfolio [10] - The portfolio has grown to $14,000,000,000, which is 25% larger since the end of the first quarter and over 50% larger than the same time last year [12] Business Line Data and Key Metrics Changes - The company raised $560,000,000 of new capital this year, allowing it to continue raising capital at a premium to book value [11] - The portfolio's liquidity at quarter end was $891,000,000, or 55% of total equity, indicating a strong liquidity position [12] Market Data and Key Metrics Changes - Agency mortgage-backed securities (MBS) continue to offer attractive returns, with ROEs on newly acquired positions ranging from the mid-teens to low 20% [19] - Mortgages remain extremely cheap relative to corporate bonds, with a mixed technical picture in the medium term affecting spread tightening [20] Company Strategy and Development Direction - The company is focused on raising capital, deploying it into historically cheap investments, and managing its portfolio carefully through volatile periods [7] - A strategic increase in leverage from 7.4% to 8.3% was executed as the policy environment became more supportive [17] - The company is building a world-class operating platform by bringing several functions in-house to achieve scale and retain institutional knowledge [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of a proactive approach to navigating market volatility and uncertainty [16] - The current environment is viewed as highly favorable for long-term capital deployment, with wide agency MBS spreads allowing for historic returns [23] - Management expressed confidence in the company's positioning to capitalize on market dynamics and generate strong risk-adjusted returns [23] Other Important Information - The company has appointed Michael Angelo as the chief legal officer and corporate secretary, bringing relevant experience from various financial institutions [5] Q&A Session Summary Question: Can you talk about the leverage range you're targeting? - Management indicated that leverage has been flexed down when the risk environment does not warrant incremental risk, and they are currently at a level that reflects a return to normal [29][30] Question: What are the conditions that might require other investors to be more active in the mortgage-backed space? - Management noted that banks would likely return when they see actual Fed rate cuts, while money managers have been overweight mortgages relative to corporates [40][41] Question: What are your thoughts on swap spreads and their future? - Management stated that current swap spreads are attractive, providing a large margin of safety, and they expect to continue generating strong returns despite potential fluctuations [46][48] Question: How do you view the coupon allocation between pools versus TBAs? - Management explained that they are working into a larger pool position, which offers more certainty in cash flows and is expected to be as attractive as thirty-year RMBS [62][63] Question: Can you provide an overview of the returns on Agency CMBS relative to RMBS? - Management highlighted that Agency CMBS offers a stable economic return profile and is being considered for its compelling return potential in the current market [60][62]