Dynex Capital(US:DX)2025-10-20 15:00Financial Data and Key Metrics Changes - Year-to-date shareholder returns were 20% as of last Friday's close, 23% over the last year, and nearly 72% over the last three years with dividends reinvested [4] - Total economic return for the quarter was 10.3% and 11.5% year-to-date, reflecting disciplined management of Agency RMBS [4] - The common equity market cap is now above $1.8 billion, indicating growth in investor trust [5] - Estimated book value is $1,271 net of the dividend accrual as of Friday's close [24] Business Line Data and Key Metrics Changes - Net interest income continues to trend upward due to new investments with attractive yields, with over $130 million of gains on the portfolio in the third quarter [9] - The portfolio has grown over 50% larger since the beginning of the year and is 10% larger since the end of the second quarter [10] Market Data and Key Metrics Changes - Agency mortgages offered wide spreads to Treasuries and interest rate swaps, with nominal spreads remaining wide [12] - The agency current coupon yield declined from nearly 5.75% to nearly 5%, leading to a sharp increase in the refinance index [13] - GSE holdings of Agency MBS could potentially increase, with the capacity to add as much as $450 billion under current agreements [32] Company Strategy and Development Direction - The company focuses on building a resilient platform at the intersection of capital markets and housing finance, emphasizing risk discipline and liquidity management [4] - The strategy includes opportunistic investing and focused value creation, with a deliberate bias towards lower coupons expected to outperform [12][15] - The company is opening a new office in New York City to attract talent and enhance business partnerships [11] Management's Comments on Operating Environment and Future Outlook - The operating environment remains complex, with vulnerabilities due to persistent inflation and geopolitical factors [5] - The Federal Reserve is committed to bringing rates down to more neutral levels, but uncertainty in the rate path is significant [6] - The company is prepared for potential surprises in the market and remains focused on strengthening its market position [8] Other Important Information - The company raised $254 million in new capital in the third quarter, bringing year-to-date new capital growth to $776 million [10] - The liquidity at quarter end was over $1 billion, representing over 50% of total equity [10] Q&A Session Summary Question: Where do you see incremental spreads and current ROEs? - ROEs in Agency RMBS remain in the high teens net of hedging costs, with gross in the mid-20s on a large percentage of the coupon stack [22] Question: Can we get an update on book value quarter to date? - Estimated book value is $1,271 net of the dividend accrual as of Friday's close [24] Question: Can you elaborate on mortgage spreads being wide relative to history? - Mortgage spreads are still in the top quartile of the widest levels when compared to interest rate swaps [27] Question: What is the potential for GSEs as a player on the demand side? - GSE holdings of Agency MBS could increase, with a capacity to add as much as $450 billion under current agreements [32] Question: How are you thinking about the hedging strategy with lower volatility? - The company is looking to repurchase options that are inherently short in a levered mortgage position, focusing on pockets of cheap volatility [36] Question: Why has the market shrugged off volatility themes? - There is more certainty in the market due to policy commitments from the Fed and clearer policy outcomes from the administration [40]