Derivative Instruments and Hedging Activities (Tables)
|
6 Months Ended |
Jun. 30, 2024 |
|---|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] |
|
| Schedule of Derivative Instruments in Statement of Financial Position, Fair Value |
The following tables present the gross fair value and notional amounts of the Company’s derivative financial instruments treated as trading derivatives as of June 30, 2024 and December 31, 2023:
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|
June 30, 2024 |
|
|
Derivative Assets |
|
Derivative Liabilities |
| (in thousands) |
|
Fair Value |
|
Notional |
|
Fair Value |
|
Notional |
Inverse interest-only securities |
|
$ |
9,424 |
|
|
$ |
149,152 |
|
|
$ |
— |
|
|
$ |
— |
|
Interest rate swap agreements |
|
— |
|
|
11,739,471 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Swaptions, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| TBAs |
|
4,095 |
|
|
26,000 |
|
|
(14,264) |
|
|
4,957,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Futures, net |
|
— |
|
|
— |
|
|
— |
|
|
(6,308,900) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
13,519 |
|
|
$ |
11,914,623 |
|
|
$ |
(14,264) |
|
|
$ |
(1,351,900) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
Derivative Assets |
|
Derivative Liabilities |
| (in thousands) |
|
Fair Value |
|
Notional |
|
Fair Value |
|
Notional |
Inverse interest-only securities |
|
$ |
12,292 |
|
|
$ |
163,735 |
|
|
$ |
— |
|
|
$ |
— |
|
Interest rate swap agreements |
|
— |
|
|
— |
|
|
— |
|
|
17,788,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Swaptions, net |
|
19 |
|
|
(200,000) |
|
|
— |
|
|
— |
|
| TBAs |
|
72,980 |
|
|
2,979,000 |
|
|
(21,506) |
|
|
518,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Futures, net |
|
— |
|
|
— |
|
|
— |
|
|
(6,203,050) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
85,291 |
|
|
$ |
2,942,735 |
|
|
$ |
(21,506) |
|
|
$ |
12,103,064 |
|
|
| Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance |
The following table summarizes the location and amount of gains and losses on derivative instruments reported in the condensed consolidated statements of comprehensive income (loss):
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|
|
|
|
| Derivative Instruments |
|
Location of Gain (Loss) Recognized in Income |
|
Amount of Gain (Loss) Recognized in Income |
|
|
|
|
Three Months Ended |
|
Six Months Ended |
| (in thousands) |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Interest rate risk management: |
|
|
|
|
|
|
|
|
|
|
TBAs |
|
(Loss) gain on other derivative instruments |
|
$ |
(27,331) |
|
|
$ |
(77,083) |
|
|
$ |
(86,511) |
|
|
$ |
(94,247) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures |
|
(Loss) gain on other derivative instruments |
|
26,678 |
|
|
126,923 |
|
|
135,614 |
|
|
(13,164) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options on futures |
|
(Loss) gain on other derivative instruments |
|
— |
|
|
— |
|
|
(127) |
|
|
— |
|
|
|
Interest rate swaps - Payers |
|
Gain (loss) on interest rate swap and swaption agreements |
|
24,508 |
|
|
123,602 |
|
|
218,938 |
|
|
51,842 |
|
|
|
Interest rate swaps - Receivers |
|
Gain (loss) on interest rate swap and swaption agreements |
|
(2,496) |
|
|
(67,291) |
|
|
(98,447) |
|
|
(77,659) |
|
|
|
Swaptions |
|
Gain (loss) on interest rate swap and swaption agreements |
|
— |
|
|
222 |
|
|
31 |
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-risk management: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inverse interest-only securities |
|
(Loss) gain on other derivative instruments |
|
(97) |
|
|
(2,679) |
|
|
(2,127) |
|
|
(1,199) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
$ |
21,262 |
|
|
$ |
103,694 |
|
|
$ |
167,371 |
|
|
$ |
(134,231) |
|
|
|
|
| Schedule of Notional Amounts of Outstanding Derivative Positions |
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|
|
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|
|
|
Six Months Ended June 30, 2024 |
| (in thousands) |
Beginning of Period Notional Amount |
|
Additions |
|
Settlement, Termination, Expiration or Exercise |
|
End of Period Notional Amount |
|
Average Notional Amount |
|
Realized Gain (Loss),
net (1)
|
| Inverse interest-only securities |
$ |
163,735 |
|
|
$ |
— |
|
|
$ |
(14,583) |
|
|
$ |
149,152 |
|
|
$ |
156,846 |
|
|
$ |
— |
|
| Interest rate swap agreements |
17,788,114 |
|
|
13,792,275 |
|
|
(19,840,918) |
|
|
11,739,471 |
|
|
13,252,491 |
|
|
16,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Swaptions, net |
(200,000) |
|
|
(500,000) |
|
|
700,000 |
|
|
— |
|
|
(116,484) |
|
|
(98) |
|
| TBAs, net |
3,497,000 |
|
|
28,031,000 |
|
|
(26,545,000) |
|
|
4,983,000 |
|
|
3,666,253 |
|
|
(24,868) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures, net |
(6,203,050) |
|
|
(15,814,100) |
|
|
15,708,250 |
|
|
(6,308,900) |
|
|
(6,423,600) |
|
|
27,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options on futures, net |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(127) |
|
| Total |
$ |
15,045,799 |
|
|
$ |
25,509,175 |
|
|
$ |
(29,992,251) |
|
|
$ |
10,562,723 |
|
|
$ |
10,535,506 |
|
|
$ |
18,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2023 |
| (in thousands) |
Beginning of Period Notional Amount |
|
Additions |
|
Settlement, Termination, Expiration or Exercise |
|
End of Period Notional Amount |
|
Average Notional Amount |
|
Realized Gain (Loss),
net (1)
|
| Inverse interest-only securities |
$ |
196,456 |
|
|
$ |
— |
|
|
$ |
(16,914) |
|
|
$ |
179,542 |
|
|
$ |
188,401 |
|
|
$ |
— |
|
| Interest rate swap agreements |
— |
|
|
10,565,783 |
|
|
(1,588,069) |
|
|
8,977,714 |
|
|
5,860,046 |
|
|
(18,580) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Swaptions, net |
— |
|
|
(200,000) |
|
|
— |
|
|
(200,000) |
|
|
(129,282) |
|
|
— |
|
| TBAs, net |
3,826,000 |
|
|
25,786,000 |
|
|
(26,561,000) |
|
|
3,051,000 |
|
|
3,740,503 |
|
|
(105,858) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures, net |
(18,285,452) |
|
|
(22,001,850) |
|
|
33,662,752 |
|
|
(6,624,550) |
|
|
(10,975,000) |
|
|
(19,970) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
$ |
(14,262,996) |
|
|
$ |
14,149,933 |
|
|
$ |
5,496,769 |
|
|
$ |
5,383,706 |
|
|
$ |
(1,315,332) |
|
|
$ |
(144,408) |
|
____________________
(1)Excludes net interest paid or received in full settlement of the net interest spread liability.
|
| Schedule of TBA Positions |
The following tables present the notional amount, cost basis, market value and carrying value (which approximates fair value) of the Company’s TBA positions as of June 30, 2024 and December 31, 2023:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2024 |
|
|
|
|
|
|
|
Net Carrying Value (4)
|
| (in thousands) |
Notional Amount (1)
|
|
Cost Basis (2)
|
|
Market Value (3)
|
|
Derivative Assets |
|
Derivative Liabilities |
| Purchase contracts |
$ |
5,780,000 |
|
|
$ |
5,707,814 |
|
|
$ |
5,693,895 |
|
|
$ |
345 |
|
|
$ |
(14,264) |
|
| Sale contracts |
(797,000) |
|
|
(757,052) |
|
|
(753,302) |
|
|
3,750 |
|
|
— |
|
| TBAs, net |
$ |
4,983,000 |
|
|
$ |
4,950,762 |
|
|
$ |
4,940,593 |
|
|
$ |
4,095 |
|
|
$ |
(14,264) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
|
|
|
|
|
|
|
Net Carrying Value (4)
|
| (in thousands) |
Notional Amount (1)
|
|
Cost Basis (2)
|
|
Market Value (3)
|
|
Derivative Assets |
|
Derivative Liabilities |
| Purchase contracts |
$ |
4,194,000 |
|
|
$ |
3,827,271 |
|
|
$ |
3,898,874 |
|
|
$ |
72,980 |
|
|
$ |
(1,377) |
|
| Sale contracts |
(697,000) |
|
|
(656,723) |
|
|
(676,852) |
|
|
— |
|
|
(20,129) |
|
| TBAs, net |
$ |
3,497,000 |
|
|
$ |
3,170,548 |
|
|
$ |
3,222,022 |
|
|
$ |
72,980 |
|
|
$ |
(21,506) |
|
___________________
(1)Notional amount represents the face amount of the underlying Agency RMBS.
(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.
(3)Market value represents the current market value of the TBA (or of the underlying Agency RMBS) as of period end.
(4)Net carrying value represents the difference between the market value of the TBA as of period end and its cost basis, and is reported in derivative assets / (liabilities), at fair value, in the condensed consolidated balance sheets.
|
| Schedule of Futures |
The following table summarizes certain characteristics of the Company’s futures as of June 30, 2024 and December 31, 2023:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (dollars in thousands) |
|
June 30, 2024 |
|
December 31, 2023 |
| Type & Maturity |
|
Notional Amount |
|
Carrying Value |
|
Weighted Average Months to Expiration |
|
Notional Amount |
|
Carrying Value |
|
Weighted Average Months to Expiration |
| U.S. Treasury futures - 2 year |
|
$ |
(2,249,200) |
|
|
$ |
— |
|
|
3.03 |
|
$ |
(549,600) |
|
|
$ |
— |
|
|
2.89 |
| U.S. Treasury futures - 5 year |
|
(1,375,300) |
|
|
— |
|
|
3.03 |
|
(1,876,700) |
|
|
— |
|
|
2.89 |
| U.S. Treasury futures - 10 year |
|
(1,557,500) |
|
|
— |
|
|
2.66 |
|
(983,300) |
|
|
— |
|
|
2.60 |
| U.S. Treasury futures - 20 year |
|
173,600 |
|
|
— |
|
|
2.66 |
|
(388,200) |
|
|
— |
|
|
2.89 |
Eris SOFR swap futures - 10 year |
|
(30,000) |
|
|
— |
|
|
122.63 |
|
— |
|
|
— |
|
|
— |
| SOFR futures |
|
|
|
|
|
|
|
|
|
|
|
|
| ≤ 1 year |
|
(1,083,000) |
|
|
— |
|
|
5.71 |
|
(1,842,750) |
|
|
— |
|
|
6.05 |
| > 1 and ≤ 2 years |
|
(187,500) |
|
|
— |
|
|
14.56 |
|
(562,500) |
|
|
— |
|
|
17.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total futures |
|
$ |
(6,308,900) |
|
|
$ |
— |
|
|
4.23 |
|
$ |
(6,203,050) |
|
|
$ |
— |
|
|
5.10 |
|
| Schedule of Interest Rate Swap Payers |
As of June 30, 2024 and December 31, 2023, the Company held the following interest rate swaps that were utilized as economic hedges of interest rate exposure (or duration) whereby the Company receives interest at a floating interest rate (OIS or SOFR):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (notional in thousands) |
|
|
|
|
|
|
| June 30, 2024 |
| Swaps Maturities |
|
Notional Amount (1)
|
|
Weighted Average Fixed Pay Rate (2)
|
|
Weighted Average Receive Rate |
|
Weighted Average Maturity (Years) (2)
|
| ≤ 1 year |
|
$ |
2,647,671 |
|
|
4.730 |
% |
|
5.330 |
% |
|
0.71 |
| > 1 and ≤ 3 years |
|
2,761,979 |
|
|
4.273 |
% |
|
5.330 |
% |
|
1.61 |
| > 3 and ≤ 5 years |
|
2,474,798 |
|
|
3.546 |
% |
|
5.330 |
% |
|
3.53 |
| > 5 and ≤ 7 years |
|
173,000 |
|
|
— |
% |
|
— |
% |
|
0.00 |
| > 7 and ≤ 10 years |
|
1,163,110 |
|
|
3.693 |
% |
|
5.330 |
% |
|
8.95 |
| > 10 years |
|
559,771 |
|
|
3.825 |
% |
|
5.330 |
% |
|
15.04 |
| Total |
|
$ |
9,780,329 |
|
|
4.238 |
% |
|
5.330 |
% |
|
3.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (notional in thousands) |
|
|
|
|
|
|
| December 31, 2023 |
| Swaps Maturities |
|
Notional Amount (1)
|
|
Weighted Average Fixed Pay Rate (2)
|
|
Weighted Average Receive Rate |
|
Weighted Average Maturity (Years) (2)
|
| ≤ 1 year |
|
$ |
— |
|
|
— |
% |
|
— |
% |
|
0.00 |
| > 1 and ≤ 3 years |
|
6,796,772 |
|
|
4.551 |
% |
|
5.380 |
% |
|
1.44 |
| > 3 and ≤ 5 years |
|
2,040,444 |
|
|
3.800 |
% |
|
5.380 |
% |
|
4.07 |
| > 5 and ≤ 7 years |
|
697,800 |
|
|
4.282 |
% |
|
5.380 |
% |
|
6.67 |
| > 7 and ≤ 10 years |
|
2,125,830 |
|
|
3.606 |
% |
|
5.380 |
% |
|
9.32 |
| > 10 years |
|
466,637 |
|
|
3.753 |
% |
|
5.380 |
% |
|
14.57 |
| Total |
|
$ |
12,127,483 |
|
|
4.245 |
% |
|
5.380 |
% |
|
3.87 |
____________________
(1)Notional amount includes $1.9 billion and $1.1 billion in forward starting interest rate swaps as of June 30, 2024 and December 31, 2023, respectively.
(2)Weighted averages exclude forward starting interest rate swaps. As of June 30, 2024 and December 31, 2023, forward starting interest rate swap payers had a weighted average fixed pay rate of 4.0% and 4.0% and weighted average maturities of 5.4 and 6.4 years, respectively.
|
| Schedule of Interest Rate Swap Receivers |
Additionally, as of June 30, 2024 and December 31, 2023, the Company held the following interest rate swaps that were utilized as economic hedges of interest rate exposure (or duration) risk whereby the Company pays interest at a floating interest rate (OIS or SOFR):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (notional in thousands) |
|
|
|
|
|
|
| June 30, 2024 |
| Swaps Maturities |
|
Notional Amount (1)
|
|
Weighted Average Pay Rate |
|
Weighted Average Fixed Receive Rate (2)
|
|
Weighted Average Maturity (Years) (2)
|
| ≤ 1 year |
|
$ |
786,641 |
|
|
5.330 |
% |
|
4.025 |
% |
|
0.72 |
| > 1 and ≤ 3 years |
|
651,875 |
|
|
— |
% |
|
— |
% |
|
0.00 |
| > 3 and ≤ 5 years |
|
260,000 |
|
|
5.330 |
% |
|
3.328 |
% |
|
3.25 |
| > 5 and ≤ 7 years |
|
— |
|
|
— |
% |
|
— |
% |
|
0.00 |
| > 7 and ≤ 10 years |
|
— |
|
|
— |
% |
|
— |
% |
|
0.00 |
| > 10 years |
|
260,626 |
|
|
5.330 |
% |
|
3.444 |
% |
|
19.51 |
| Total |
|
$ |
1,959,142 |
|
|
5.330 |
% |
|
3.770 |
% |
|
4.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (notional in thousands) |
|
|
|
|
|
|
| December 31, 2023 |
| Swaps Maturities |
|
Notional Amount (1)
|
|
Weighted Average Pay Rate |
|
Weighted Average Fixed Receive Rate (2)
|
|
Weighted Average Maturity (Years) (2)
|
| ≤ 1 year |
|
$ |
— |
|
|
— |
% |
|
— |
% |
|
0.00 |
| > 1 and ≤ 3 years |
|
2,470,819 |
|
|
5.380 |
% |
|
4.204 |
% |
|
1.36 |
| > 3 and ≤ 5 years |
|
780,000 |
|
|
5.380 |
% |
|
3.845 |
% |
|
1.36 |
| > 5 and ≤ 7 years |
|
988,026 |
|
|
5.380 |
% |
|
4.023 |
% |
|
4.03 |
| > 7 and ≤ 10 years |
|
1,161,160 |
|
|
5.380 |
% |
|
4.013 |
% |
|
9.57 |
| > 10 years |
|
260,626 |
|
|
5.380 |
% |
|
3.444 |
% |
|
20.01 |
| Total |
|
$ |
5,660,631 |
|
|
5.380 |
% |
|
4.052 |
% |
|
5.00 |
____________________
(1)Notional amount includes $651.9 million and $645.2 million in forward starting interest rate swaps as of June 30, 2024 and December 31, 2023, respectively.
(2)Weighted averages exclude forward starting interest rate swaps. As of June 30, 2024 and December 31, 2023, forward starting interest rate swap receivers had a weighted average fixed receive rate of 4.5% and 4.4% and weighted average maturities of 2.0 and 2.0 years, respectively.
|
| Schedule of Interest Rate Swaptions |
As of December 31, 2023, the Company had the following outstanding interest rate swaptions:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2023 |
| (notional and dollars in thousands) |
|
Option |
|
Underlying Swap |
| Swaption |
|
Expiration |
|
Cost |
|
Fair Value |
|
Average Months to Expiration |
|
Notional Amount |
|
Average Fixed Rate |
|
|
|
Average Term (Years) |
| Purchase contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payer |
|
< 6 Months |
|
$ |
480 |
|
|
$ |
22 |
|
|
2.40 |
|
|
$ |
200,000 |
|
|
5.13 |
% |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sale contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payer |
|
< 6 Months |
|
$ |
(332) |
|
|
$ |
(3) |
|
|
2.40 |
|
|
$ |
(400,000) |
|
|
5.61 |
% |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|