AGNC Investment Corp. Q3 FY2022 Earnings Call

Good morning, and welcome to the AGNC Investment Corp. Third Quarter 2022 Shareholder Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Katie Wisecarver in Investor Relations. Please go ahead.

Thank you all for joining AGNC Investment Corp.'s Third Quarter 2022 Earnings Call. Before we begin, I'd like to review the safe harbor statement. This conference call and the accompanying slide presentation contain statements that, to the extent they are not historical facts, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ significantly from those projected due to many factors beyond AGNC's control. All forward-looking statements made in this presentation are current as of today and may change without notice. Certain factors that could lead to actual results differing materially from the forward-looking statements are included in AGNC's periodic reports filed with the Securities and Exchange Commission, which can be found on the SEC's website at sec.gov. We do not undertake any obligation to update our forward-looking statements unless required by law. Participants on the call include Peter Federico, Director, President and Chief Executive Officer; Bernie Bell, Executive Vice President and Chief Financial Officer; Chris Kuehl, Executive Vice President and Chief Investment Officer; Aaron Pas, Senior Vice President of Non-Agency Portfolio Management; and Sean Reid, Executive Vice President, Strategy and Corporate Development. With that, I'll turn the call over to Peter Federico.

Thank you, Katie, and thank you to everyone for joining our call today. Financial markets experienced broad-based weakness in the third quarter as macroeconomic and monetary policy uncertainty intensified both domestically and abroad. This led to a sharp decline in investor sentiment and a significant repricing in both the equity and fixed income markets. With the S&P 500 Index falling 17% and the unlevered Bloomberg Aggregate Bond Index falling 7.5% from their respective inter-quarter highs. In the early stages of market downturns, it is not uncommon for the U.S. Treasury and Agency MBS markets to underperform other fixed income products because these securities are the most liquid and thus easiest for investors to convert to cash. Bond fund outflows are an obvious example of this type of selling pressure. Agency MBS are the most liquid spread product across the entire fixed income spectrum. As such, in certain environments, particularly when investors favor liquidity, the selling pressure on Agency MBS can be greater than other asset classes further out the liquidity and credit spectrum. This was indeed the case in the third quarter. On Page 7 of the investor presentation, we show the spread or yield differential between the 30-year current coupon MBS and the 10-year treasury since January of 2009. This graph is helpful because it provides historical context for the recent spread widening. As you can see, the spread recently widened to the extreme of 190 basis points. A significant portion of this widening occurred late in September following an unforeseen episode of instability in the U.K. bond market that led to a significant repricing and risk-off sentiment in our treasury and Agency MBS markets. As we have discussed, wider spreads impact our business in two ways. First, as spreads widen, the book value of our existing portfolio declines as has been the case this year. On the positive side, however, wider spreads also enhance the future value of our business by improving the go-forward return on our portfolio. The supply outlook for Agency MBS has also continued to improve. With primary mortgage rates now well above 7%, origination volume over the remainder of the year will likely be very limited, and the runoff of the Fed's portfolio will also be materially slower than previously anticipated. Putting this all together, Agency MBS are undeniably attractive. Spreads are at unprecedented levels. The supply outlook is very favorable. And finally, Agency MBS are guaranteed by the U.S. government and thus do not have the credit exposure in a recession scenario, which adds to their attractiveness relative to other fixed income alternatives. The recovery in valuation levels could happen rapidly. So as difficult as this year has been, given the spread widening that has already occurred, it is important to understand the unique opportunity that we believe is on the other side of this historic repricing event. With that, I'll now turn the call over to Bernie Bell to discuss our financial results in greater detail.

Thank you, Peter. For the third quarter, AGNC had a comprehensive loss of $2.01 per share. Economic return on tangible common equity was negative 17.4% for the quarter comprised of the decline in tangible net book value of approximately 20% and dividends declared of $0.36 per common share. Given the very challenging market conditions during the third quarter, we continued to prioritize risk management, operating with a high interest rate hedge ratio, lower leverage and a strong liquidity position. In addition, we opportunistically issued approximately $290 million of common equity through our at-the-market offering program at an average price of $10.10 per share and issued $150 million of fixed rate reset preferred equity. Our average leverage for the quarter increased moderately to 8.1x tangible equity from 7.8x for the prior quarter. Our leverage at the end of the quarter was higher at 8.7x primarily as a function of book value declines late in the quarter. At quarter-end, we had cash and unencumbered Agency MBS totaling $3.6 billion, or 54% of our tangible equity and approximately $100 million of unencumbered credit securities. Net spread and dollar roll income, excluding catch-up AM, was $0.84 per share for the quarter. The slight increase from $0.83 per share for the second quarter was the result of higher asset yields and our large interest rate swap position, which more than offset higher funding costs and declining dollar roll income. Lastly, our average projected life CPRs as of the end of the quarter decreased modestly to 7%, while actual CPRs continue to slow meaningfully averaging 9% for the quarter. I'll now turn the call over to Chris Kuehl to discuss the agency mortgage market.

Thanks, Bernie. As Peter discussed, Agency MBS spreads continued to widen during the third quarter and in particular in the month of September as rates and volatility surged higher. PAR coupon spreads to a blend of five and 10-year U.S. treasury debt ended the quarter at approximately 170 basis points. To put the degree of mortgage spread widening during the month of September into perspective, the Bloomberg Mortgage Index, which is an index of all Fannie Mae, Freddie Mac and Ginnie Mae MBS experienced its worst excess return versus treasuries on record going back more than 30 years. Agency spreads to treasury, swaps and corporate debt are extraordinarily wide. Historically, the few times that PAR coupon spreads reached levels beyond 150 basis points, it was short-lived and importantly, the funding markets were in distress and prepayment risk was high, neither is the case today. On our last call, we discussed the increasingly hawkish Fed sentiment and elevated interest rate volatility as being the primary headwinds to Agency MBS performance, and those headwinds remain today. However, even adjusting for the current level of rate volatility, spreads on Agency MBS are compelling. And when rate volatility ultimately settles, Agency MBS will materially outperform. Moreover, this recovery could be very rapid. The only way to reconcile current agency spread levels is to infer a lack of sponsorship due to bond fund outflows, the large percentage of passive index-based management in capital-constrained banks. As of September 30, our investment portfolio totaled $61.5 billion. During the quarter, we continued to reposition our holdings across the coupon stack. Today's MBS market is particularly unique with more than 10 actively traded 30-year coupons, which speaks to the magnitude of recent interest rate moves. Our hedge portfolio totaled approximately $69 billion at quarter end, down about $3.5 billion from the previous quarter. Our duration gap as of September 30 was 1.2 years. And despite the 40 basis point increase in 10-year interest rates since quarter end, we have proactively reduced our duration gap to inside of one-year through rebalancing actions in both assets and hedges. I'll now turn the call over to Aaron to discuss the non-agency markets.

Thanks, Chris. Spreads across the structured product space in the third quarter remained volatile, largely tracking the risk sentiment in broader markets. The repricing of the terminal rate and shifting expectations of the Fed's future path continue to drive the market's direction. After gradually firming up across the capital structure in the first six weeks of the quarter, the second half of Q3 largely reversed that spread tightening. At this juncture, while credit spreads have leaked wider, trading has generally been quite orderly. However, some signs of stress are evident and liquidity is relatively low. These factors have, in part caused the credit curves in many products to be flatter than one would expect given the deteriorating economic outlook. Housing activity has declined materially as significantly higher mortgage rates have stretched affordability to extreme levels, while reducing mobility as more homeowners are locked into their current residences with low fixed rate mortgages. While the structural supply imbalance will remain supportive of housing in the longer run, our expectation is that house prices will decline gradually and on relatively low transaction volume. This could reverse most of the prior year's gains over the coming 12 to 18 months. Importantly, due to the sharp run-up in house prices from Q2 2021 to Q2 2022, there is relatively little credit risk embedded in loans originated more than a year ago. This coupled with the high percentage of fixed-rate mortgage debt provides significant support from mortgage credit performance. With respect to our holdings, the non-agency portfolio declined over the quarter, ending Q3 at $1.7 billion. We reduced our AAA holdings and rotated out of fixed-rate RMBS AAAs in favor of floating-rate commercial back AAAs. In addition, we repositioned some of our more credit-focused holdings. We believe our non-agency portfolio is well positioned for the current environment. As a result of the seasoning of the loans back in our CRT and RMBS holdings, the average LTV across the portfolio is in the low 50s on a mark-to-market basis. As such, we would expect credit performance to be relatively insensitive to even moderate changes in house prices for the majority of our portfolio. With that, I'll turn the call back over to Peter.

Thank you, Aaron. And with that, we'll now open the call up to your questions.

Thank you. We will now begin the question-and-answer session. The first question comes from Doug Harter with Credit Suisse. Please go ahead.

Thanks. Can you talk about how you're looking to balance risk management and maintaining leverage with the near-term risk versus the opportunity for the snapback in Agency MBS that you talked about?

Sure, Doug. Good morning. Thank you for your question. We ended the quarter with leverage at 8.7, which was up from the previous quarter. However, as of last Friday, our leverage was approximately 8.4, and we believe that's a favorable position to be in. This level of leverage is right in the middle of our normal operating range, which is quite comfortable from our perspective. More importantly, it reflects a balance between the challenges we encounter in the overall bond market, including illiquidity and volatility, and the fact that we are seeing some of the best returns we've ever experienced in the Agency MBS market. We have gone through significant repricing and faced illiquidity late in September, with the market continuing to be challenging since then. However, considering the current returns, this moment may represent a unique opportunity for substantial returns. We are satisfied with our current position, as our leverage is comfortable and our liquidity is strong. We can discuss that in more detail. Overall, we're focused on balancing our risk management strategies while taking advantage of the attractive returns available right now. I'll pause there and encourage any follow-up questions.

On the topic of unique opportunities and the potential for recovery, I wonder if there are enough buyers to support this. You mentioned the dynamics of supply and demand. Who are the additional buyers that could help restore the spread?

Yes. It's a great point. And what I would say when you're in these sort of really illiquid markets like global bond markets have entered, you have the real risk of overshooting in both directions. And unfortunately, for Agency MBS, because they are so liquid and because they are the most liquid spread product, they tend to lead in the overshoot, and we certainly saw that. The flip side of that is also that you can have a really sharp recovery as well. One of the issues that the sort of macro bond market, and this is both treasuries and Agency MBS is facing, is that there's the preponderance of passive investors. So what we've seen as the Fed has tightened monetary policy is that the flows in both the treasury and Agency MBS market are dominated by bond fund managers. And there's obviously been huge amounts of bond fund outflows as the Fed has tightened and rates have risen. It's a bear market in demand market, and you would expect that. And they are the source of selling pressure and the buying is relatively limited. You can also look at that and say the opposite is undoubtedly going to be the case because there are no natural sellers either of mortgages once that flow stops, right? And we've already begun to see, I think, some of that with returns where they are both on an absolute and relative basis in the Agency MBS market. For example, on an absolute basis, investors could get a government guaranteed power price bond at a 6% yield, 200 basis points over the treasury for the same credit in an environment where you're looking at a recession, that is a really attractive return. So I think you're going to start to see inflows into the Agency MBS market. I noticed that last week when it was a Bloomberg story where the MBS ETF had its largest inflow in a single day ever. So as the market stabilizes, I think you'll see the opposite effect, which is there's going to be buyers emerging, and there are no natural sellers because there's no natural supply of Agency MBS at this level of REIT. So that's the technical that you're looking at that will be really favorable once the bond market stabilizes. And I think ultimately, as we all know, it is going to stabilize, and I think that there's a real opportunity ahead of us. We've seen that in the past, and you may look at spreads where they are today and say at 200 basis points over. That's not the worst that they've ever been because you can look back at the great financial crisis. But if you look at the great financial crisis for us to say, it is nothing alike. The Agency MBS market is not the problem here. There's no liquidity problems, there's no selling problems. There's no prepayment risk problems. There's no risk out of the Fed. In the great financial crisis when spreads were wider, you had the GSEs at the heart of the problem. The very credit of the Agency MBS was in question. Bank capital was in question, huge funding problems. So you could justify potentially wider spreads in that environment. When you look at spreads today at close to 200 off, I would say they're the best risk-adjusted returns that the Agency MBS market has ever seen.

Great. I appreciate that, Peter.

Our next question comes from Bose George with KBW. Please go ahead.

Hey everyone. Good morning.

Hey Bose. How are you?

Good. Thanks. Can I get your updated book value?

Sure. As of last week, our book value decreased by approximately 15%. To provide some context, the market has been particularly volatile this month, making it difficult for many to gauge the situation clearly. However, if we examine our stock performance, it has closely followed our book value trends, also down by around 15%. This decrease can be dissected into two main factors. First, we need to consider the performance of mortgages and the widening of spreads, which have likely increased by about 15% on average. This factor contributes approximately 11% to the decline in book value. It’s complicated since many focus on the current coupon performance, which has been relatively robust. At the end of September, the current coupon was at 5.5%, and it has since risen to 6%. A deeper analysis of various coupons reveals significant performance disparities. For instance, the 2.5% coupon fell by 3.5 points, while the 4.5% coupon was down around 2.5 points, and the five-year treasury only dropped one point. When we consider our hedging strategy across different durations, such as two, five, and ten years, the steepening of the curve especially benefited the ten-year segment, which rose 40 basis points from a hedging perspective. Different results could emerge depending on the nature of your hedges. For instance, if one relied solely on ten-year hedges, which we would find acceptable due to our portfolio size and hedging approach, the results could look quite different. From our viewpoint, particularly because of the underperformance of the five-year in relation to our curve, this factor contributed significantly to the overall performance decline. At the beginning of this quarter, we noted a duration gap of about a year due to movements in rates—20 basis points on the five-year and 40 on the ten-year, averaging out to about 30 basis points, which would account for a roughly 3% hit to book value. Therefore, considering the 15 basis points widening in spreads, especially impacting the central part of the coupon stack, we arrive at the 15% drop in book value. Despite this, we are currently achieving some of the best returns we have ever experienced. That's our situation at this moment.

Okay, great. Thanks. That's helpful.

Sure. Thank you for the question.

Given the current dividend, about 44 on your implied book value, which is, I guess, in the high 7s, suggest the dividend yield, I guess very high teens. I mean does your portfolio generate that to cover that dividend?

Yes, this is the really key point. Thank you for the question. Obviously, when we think about our dividend, we are constantly evaluating a whole range of considerations, the composition of the portfolio, the volatility of interest rates, alternative uses of capital, things like that general market conditions, and the expected leverage. But what's really, I think critical to understand, I think is the heart of your question is you have to understand what drove the decline in our book value. And if you look at the performance of mortgages and you look at that graph that we show, I think it's clear to everybody when you look on Page 7, that mortgage spreads have gone in one direction only for the better part of the last 18 months, 65 basis points wider, if you will from August to now. So the decline in our book value is driven primarily by wider spreads. So while it hurts your book value currently because the decline in book value came from wider spreads, it also enhances the go-forward return on our portfolio. So said another way, as our dividend yield has gone up with the decline in our book value, the return on our portfolio has gone up in a commensurate way. So if you looked at our portfolio today, you sold it, bought it all back, our portfolio is marked to today's valuations. So if you looked at that and you said, what do mortgages earn at this dollar price at this spread, you would conclude that the go-forward return on our portfolio actually matches very nicely the current dividend yield. So that's one of the key things that we always look at. We talked about that a lot. So going forward, I still believe that those two things are reasonably well aligned. And obviously, conditions change and markets are volatile. We're going to continue to be diligent about monitoring that. But the go-forward return on our portfolio still is consistent with our dividend.

Okay, great. That's very helpful. Thanks a lot.

Yes, thank you, Bose.

The next question comes from Trevor Cranston with JMP Securities. Please go ahead.

Hey, thanks. Good morning.

Good morning, Trevor.

A question on the historical spread chart you guys have on Slide 7. Generally, I was just curious when you guys look at spread versus historical levels, have you guys sort of adjust for the fact that either the Fed or the GSEs have been sort of a huge buyer and backs up on the market for much of the last 20 years? And how kind of comparable do you think spreads are today versus levels where those guys have been in the market?

Yes. You're 100% right. I mean, obviously, the chart that we show doesn't really have any impact of the GSE's portfolio that was all prior to the Great Financial Crisis in terms of any kind of meaningful impact. But certainly, prior to that, they did have an impact on the overall valuations. And then post-Great Financial Crisis, there's no doubt, starting with QE1 in 2008 or '09, whenever it was, the Fed has basically participated in this market for 11 out of 14 years or something like that, whether they're either buying mortgages or reinvesting their paydowns. So they did have an impact, and they are obviously exiting the market. On the flip side of that, you could also conclude that the Agency MBS market is forever foundational to the Fed's monetary policy, right? They're not going to stay out of the market forever, and they clearly care, and you can see that in the words that they communicated even as late as last week, where they are monitoring and paying attention to the functioning of both the U.S. agency and the U.S. treasury market. So they have had an impact. But the flip side is, when you think about the Fed's portfolio running off, it's really critical to think about the environment in which the portfolio is running off. If it's a low rate environment, then it would be much more challenging for Agency MBS because you would be facing the Fed running off its balance sheet and you'll be facing an increasing amount of supply. Frankly, that was the risk that we saw at the beginning of 2022. At mortgage rates at 7.25%, there is effectively almost no supply of mortgages. And even though the Fed is running off, I don't think that, that's going to be a material impact. So you're right that it's a factor and it's something you have to think about. But I don't think the new norm is where we are today. It may be higher than the average, the 80 basis points that I've showed on this one, on this chart. And if you looked at this chart, I call it a sort of forever, the maximum function. If you looked at this chart on Bloomberg, the average would be about 90 basis points since the 80s to now and the range would be 75 to 125 basis points. We may settle out somewhere closer to the high point of the average range of 125, but I don't think we're going to settle out here at 200 basis points. It's just too much absolute return for the same credit. I think you're going to get levered buyers and you're going to get unlevered buyers buying Agency MBS at these levels once market conditions stabilize. I know Chris wants to add something to that.

I would just add, I mean, just put into perspective how extraordinarily wide current spread levels are, the last time the Fed was running off its balance sheet in 2018 and 2019, current spreads averaged levels about 100 basis points tighter than where they are today.

Yes, okay, that's helpful.

One final point I forgot to mention, Trevor, is that you need to consider the ownership of the market. The Fed currently holds 30% of the Agency MBS market. With rates at their current levels, by the end of next year, the Fed's runoff will likely be less than $15 billion a month, returning to the level they had when they initially phased in the runoff. This means the Fed's runoff will be quite slow, and they will continue to hold a significant amount of stock for a long time. Additionally, banks own another 40%, which is largely out of the trading supply. These are key points to keep in mind moving forward, even as they step back from the market.

Yes, certainly. In your prepared remarks, you mentioned two significant challenges for MBS. One is the technical supply-demand dynamics that you discussed extensively. The other is high volatility. My question is whether you foresee any potential factors that might lead to a decrease in realized volatility in the near term, or do you believe that high volatility is likely to persist for the foreseeable future?

I do see potential catalysts, and perhaps we're beginning to observe them in recent days. It's important to gather more data points and remain mindful of the challenging conditions in the bond market, which have persisted for some time. However, we must also remember that we are deep into the tightening process, and as the saying goes, it often feels darkest before dawn. The Federal Reserve seems intent on raising rates further, as indicated by the Fed funds futures peaking around 490 for March or April of next year. While the Fed may or may not reach that target, some recent comments suggest that the market might have overreacted. There are indications that a more cautious approach to achieving that level could be warranted. With a Fed meeting scheduled for early November and another in December, it will be crucial to hear their perspective on future pace adjustments. The recent market instability stemmed from a disappointing inflation report, followed by hawkish comments from the Fed that shook market confidence. The Fed has taken significant steps to impose restrictive monetary policy and may continue to do so in the upcoming meeting, possibly implementing an increase of 75 or even 50 basis points. They might also signal a more measured approach moving forward, allowing the impact of their previous rate adjustments to fully manifest in the economy. This adjustment could be a key positive change for the market in the coming months. Additionally, recent international instability, particularly in the U.K., has had a tumultuous impact on our bond market, but with the new Prime Minister taking office, there seems to be some market stabilization, as bond levels are rallying globally. While we are not fully there yet, I'm optimistic about reaching that stability soon.

Okay. I appreciate the comment. Thank you guys.

Sure. Thank you for the question.

Our next question comes from Vilas Abraham of UBS. Please go ahead.

Hey everyone. How are you? I just wanted to start by discussing the duration gap. It looks like you guys are up by 1.2 years. How are you considering that given the current interest rates? Are you planning to address that?

Sure. Yes. So you're right. Our duration gap was there, Vilas. Today, it's really around three quarters of a year. So we've reduced our exposure a little bit, but we still think the duration gap where it is seems to be a reasonable place to be. Part of what goes into that is how do we think mortgages are going to perform and Chris can talk a little bit about this in a minute. I'll turn it over to him to talk a little bit about the sort of convexity profile has improved. So obviously, that goes into our duration gap position, but also where we are in the sort of rate repricing process. And obviously, with 10 years at 4.25, two years at 2.5. While certainly, higher rates are possible, we feel like those rates are probably pretty fairly priced right now. So maybe not quite as much upside risk as we were facing a few weeks ago given where 10 years are today. So we've reduced our overall sensitivity a little bit, but we kind of like where we are. Chris, do you want to talk about the complexity of the market?

Yes, sure. So as Peter mentioned, given some of the actions that we took since quarter end on both the hedging sides as well as on the asset side, our duration gap is currently around three quarters of a year. The motivation for shortening the duration gap in the current environment is that we expect mortgages to trade long for moderate moves in rates, widening into higher rates, outperforming into lower rates. And this is just driven by overall sentiment around Fed policy and bond fund flows. The portfolio does still have more contraction risk than extension risk into very large rate moves. And so for that reason, we're still likely to carry a positive duration gap, just not as long as we were as of 9/30.

Okay. Regarding leverage, it seems you are satisfied with your current position for the time being. However, as we experience reduced volatility and a potential pause from the Fed, what do you anticipate regarding the timing of increasing that leverage?

Yes, I think the pace is quicker than I anticipated. In this market, we've reached levels where, as I mentioned earlier, there's a higher risk of a significant change in valuation. We discussed this during our second quarter call when mortgages had a spread of 125 to 150, and there was a chance that they would remain wide for some time and stabilize. However, at the current rate level, I doubt we can expect the same stability in the spread. There's a real risk that mortgage spreads, which have widened, could also tighten just as quickly. Of course, there's also the possibility that they could widen further. We need to be very aware of potential movements in both directions, which could be sharper than before, affecting how quickly leverage might change. It's important to remember that for investors to earn a return, it doesn't necessarily mean we need to increase leverage. When you invest in AGNC today, you're investing in a pool of Agency MBS at current valuation levels that reflect the widest spreads we've seen on a risk-adjusted basis. This investment has its own merits; while there's a risk of spreads widening further or tightening significantly, the overall economic experience can remain positive regardless of whether we increase leverage. We must keep that in mind. Our portfolio is marked to market, and considering the dividend discussion, the future return profile looks very appealing from a carry perspective, not accounting for any potential upside that could arise from strengthening spreads. Historically speaking, after the significant tightening following 2020, we saw some of our best performance, and similarly, during periods when spreads were at 250 basis points, AGNC achieved its highest returns. As expected, we tend to generate our best results following major widening events, and this is certainly one of the most significant widening periods the market has faced.

And you think that one of the big catalysts of that kind of snapback would be the bid from money managers and bond fund managers coming back in quickly?

Yes, I believe this is a crucial point. I also think a rotation is likely to happen. If you tune into CNBC, you'll hear discussions about 60:40 portfolios moving forward due to the current bond prices. There is significant real money being invested back into bonds, whether from insurance companies, money managers, or pension funds, and they are starting to see returns that haven't been available for such credit quality. This influx of unlevered money into the bond market will benefit Agency MBS, especially considering the outlook of very limited supply. Chris, would you like to add anything to that?

I wanted to emphasize that with mortgage rates at 7%, there has been significant demand destruction in the housing market. From a supply standpoint, we're entering a period with the lowest supply in the last two years. In 2021, we experienced $850 billion of organic mortgage net supply, whereas this year it will be around $550 billion, and next year it's projected to be between $200 and $250 billion. Additionally, the reduced turnover and weaker housing market indicate that the runoff from the Fed’s portfolio will be considerably lower than it has been. Therefore, when bond fund flows stabilize, it won't take much for mortgages to be highly sought after given the limited supply available.

Got it, thanks everyone. I'll hop back in the queue.

Yes, thank you for the question.

This concludes the question-and-answer session. I'd like to turn the call back over to Peter Federico for concluding remarks.

Thank you, operator, and thank you for everybody for your participation on the call today. I'll just leave you with one final thought, which was what I said in my prepared remarks is while we know that this has been a very challenging year from an investor perspective, given the spread widening that has already occurred. I think it's important that we continue to understand that we have, we believe, a very unique opportunity still ahead of us given where Agency MBS are today. So we appreciate your participation, and we look forward to talking to you again after our fourth quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.