Dynex Capital(US:DX)2025-10-20 15:02Financial 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] 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 [8] - The portfolio has grown over 50% larger since the beginning of the year and is 10% larger since the end of the second quarter [9] Market Data and Key Metrics Changes - Agency mortgages offered wide spreads to Treasuries and interest rate swaps, with implied volatility declining early in the quarter [11] - The agency current coupon yield declined from nearly 5.75% to nearly 5%, leading to a sharp increase in the refinance index [12] Company Strategy and Development Direction - The company aims to build a resilient platform at the intersection of capital markets and housing finance, focusing on risk discipline and liquidity management [4] - A new office in New York City is being opened to attract talent and strengthen business partnerships [10] 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, emphasizing a deliberate growth strategy [7] Other Important Information - The company has raised $254 million in new capital in the third quarter and $776 million year-to-date, allowing for capital growth at a premium to book value [9] - The company is focused on disciplined risk management and liquidity to weather future volatility, with liquidity at over $1 billion [9] Q&A Session Summary Question: Current ROEs and dividend implications - 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 [23] Question: Update on book value - Estimated book value is $1,271 net of the dividend accrual as of Friday's close [25] Question: Mortgage spreads and historical context - Mortgage spreads are still in the top quartile of the widest levels when compared to interest rate swaps [29] Question: Demand side outlook for GSEs - GSE holdings of Agency MBS could increase, with the capacity to add as much as $450 billion under current agreements [36] Question: Impact of implied volatility on hedging strategy - The company is looking at pockets of cheap volatility to stabilize the duration of the portfolio [41] Question: Market's reaction to volatility themes - The market has reacted to increased certainty in policy outcomes, but the company remains prepared for unexpected events [45]