|
Derivative Instruments and Hedging Activities (Tables)
|
3 Months Ended |
9 Months Ended |
|
Sep. 30, 2011
|
Sep. 30, 2012
|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] |
|
|
| Schedule of Interest Rate Swaps Associated with TBA Contracts [Table Text Block] |
As of December 31, 2011, all of the Company's interest rate swap contracts received interest at a 1-month or 3-month LIBOR rate, except the following interest rate swap entered in combination with TBA contracts to economically hedge mortgage basis widening where the Company paid interest at a 3-month LIBOR rate:
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|
(notional in thousands) |
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|
December 31, 2011 |
Swaps Maturities |
|
Notional Amounts |
|
Average Pay Rate |
|
Average Fixed Receive Rate |
|
Average Maturity (Years) |
2016 |
|
175,000 |
|
|
0.420 |
% |
|
1.772 |
% |
|
4.58 |
|
Total |
|
175,000 |
|
|
|
|
|
|
|
|
|
| Schedule of Interest Rate Swaps Associated with Repurchase Agreements [Table Text Block] |
|
As of September 30, 2012 and December 31, 2011, the Company had the following outstanding interest rate swaps that were utilized as economic hedges of interest rate risk associated with the Company's short-term repurchase agreements:
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|
(notional in thousands) |
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|
|
September 30, 2012 |
Swaps Maturities |
|
Notional Amounts |
|
Average Fixed Pay Rate |
|
Average Receive Rate |
|
Average Maturity (Years) |
2012 |
|
25,000 |
|
|
0.868 |
% |
|
0.502 |
% |
|
0.23 |
|
2013 |
|
2,275,000 |
|
|
0.713 |
% |
|
0.484 |
% |
|
0.81 |
|
2014 |
|
1,675,000 |
|
|
0.644 |
% |
|
0.497 |
% |
|
1.82 |
|
2015 |
|
2,770,000 |
|
|
0.908 |
% |
|
0.471 |
% |
|
2.68 |
|
2016 and Thereafter |
|
5,350,000 |
|
|
0.923 |
% |
|
0.410 |
% |
|
4.45 |
|
Total |
|
12,095,000 |
|
|
0.841 |
% |
|
0.450 |
% |
|
2.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(notional in thousands) |
|
|
|
|
|
|
December 31, 2011 |
Swaps Maturities |
|
Notional Amount |
|
Average Fixed Pay Rate |
|
Average Receive Rate |
|
Average Maturity (Years) |
2012 |
|
25,000 |
|
|
0.868 |
% |
|
0.315 |
% |
|
0.98 |
|
2013 |
|
2,025,000 |
|
|
0.737 |
% |
|
0.368 |
% |
|
1.55 |
|
2014 |
|
1,275,000 |
|
|
0.670 |
% |
|
0.380 |
% |
|
2.72 |
|
2015 |
|
820,000 |
|
|
1.575 |
% |
|
0.329 |
% |
|
3.52 |
|
2016 |
|
240,000 |
|
|
2.156 |
% |
|
0.316 |
% |
|
4.32 |
|
Total |
|
4,385,000 |
|
|
0.952 |
% |
|
0.361 |
% |
|
2.41 |
|
|
| Schedule of Interest Rate Swaps Associated with U.S. Treasuries and Other RMBS [Table Text Block] |
|
As of September 30, 2012 and December 31, 2011, the Company held $1.0 billion in fair value of U.S. Treasuries classified as trading securities and the following outstanding interest rate swaps:
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|
(notional in thousands) |
|
|
|
|
|
|
September 30, 2012 |
Swaps Maturities |
|
Notional Amounts |
|
Average Fixed Pay Rate |
|
Average Receive Rate |
|
Average Maturity (Years) |
2015 |
|
1,000,000 |
|
|
0.799 |
% |
|
0.470 |
% |
|
2.53 |
|
Total |
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(notional in thousands) |
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|
|
|
December 31, 2011 |
Swaps Maturities |
|
Notional Amounts |
|
Average Fixed Pay Rate |
|
Average Receive Rate |
|
Average Maturity (Years) |
2013 |
|
1,250,000 |
|
|
0.620 |
% |
|
0.339 |
% |
|
1.54 |
|
Total |
|
1,250,000 |
|
|
|
|
|
|
|
|
| Schedule of Interest Rate Swaptions [Table Text Block] |
|
Additionally, as of September 30, 2012 and December 31, 2011, the Company had the following outstanding interest rate swaptions (agreements to enter into interest rate swaps in the future for which the Company would pay a fixed rate) that were utilized as macro-economic hedges:
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|
September 30, 2012 |
(notional and dollars in thousands) |
|
Option |
|
Underlying Swap |
Swaption |
|
Expiration |
|
Cost |
|
Fair Value |
|
Average Months to Expiration |
|
Notional Amount |
|
Average Fixed Pay Rate |
|
Average Receive Rate |
|
Average Term (Years) |
Payer |
|
< 6 Months |
|
$ |
1,995 |
|
|
$ |
— |
|
|
0.87 |
|
200,000 |
|
|
3.25 |
% |
|
3M Libor |
|
7.0 |
|
Payer |
|
≥ 6 Months |
|
133,908 |
|
|
105,064 |
|
|
55.43 |
|
4,950,000 |
|
|
3.75 |
% |
|
3M Libor |
|
9.8 |
|
Total Payer |
|
|
|
$ |
135,903 |
|
|
$ |
105,064 |
|
|
55.43 |
|
5,150,000 |
|
|
3.73 |
% |
|
3M Libor |
|
9.7 |
|
|
|
|
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|
|
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|
December 31, 2011 |
(notional and dollars in thousands) |
|
Option |
|
Underlying Swap |
Swaption |
|
Expiration |
|
Cost |
|
Fair Value |
|
Average Months to Expiration |
|
Notional Amount |
|
Average Fixed Pay Rate |
|
Average Receive Rate |
|
Average Term (Years) |
Payer |
|
< 6 Months |
|
$ |
16,147 |
|
|
$ |
4 |
|
|
4.97 |
|
1,600,000 |
|
|
3.22 |
% |
|
3M Libor |
|
3.7 |
|
Payer |
|
≥ 6 Months |
|
13,523 |
|
|
5,631 |
|
|
12.27 |
|
1,300,000 |
|
|
3.19 |
% |
|
3M Libor |
|
6.5 |
|
Total Payer |
|
|
|
$ |
29,670 |
|
|
$ |
5,635 |
|
|
12.26 |
|
2,900,000 |
|
|
3.21 |
% |
|
3M Libor |
|
4.9 |
|
|
| Schedule of Credit Default Swaps, Receive Protection [Table Text Block] |
|
The following tables present credit default swaps where the Company is receiving protection held as of September 30, 2012 and December 31, 2011:
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|
|
|
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|
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|
(notional and dollars in thousands) |
|
|
|
|
|
|
|
|
September 30, 2012 |
Protection |
Maturity Date |
|
Average Implied Credit Spread |
|
Current Notional Amount |
|
Fair Value |
|
Upfront Payable |
|
Unrealized Gain/(Loss) |
Receive |
9/20/2013 |
|
460.00 |
|
|
(45,000 |
) |
|
$ |
(269 |
) |
|
$ |
(3,127 |
) |
|
$ |
(3,396 |
) |
|
12/20/2013 |
|
181.91 |
|
|
(105,000 |
) |
|
(178 |
) |
|
(3,225 |
) |
|
(3,403 |
) |
|
6/20/2016 |
|
105.50 |
|
|
(100,000 |
) |
|
(1,538 |
) |
|
(260 |
) |
|
(1,798 |
) |
|
12/20/2016 |
|
682.82 |
|
|
(121,000 |
) |
|
(1,029 |
) |
|
(13,062 |
) |
|
(14,091 |
) |
|
6/20/2017 |
|
586.18 |
|
|
(99,000 |
) |
|
(863 |
) |
|
(3,563 |
) |
|
(4,426 |
) |
|
5/25/2046 |
|
306.99 |
|
|
(140,707 |
) |
|
58,461 |
|
|
(61,852 |
) |
|
(3,391 |
) |
|
Total |
|
383.49 |
|
|
(610,707 |
) |
|
$ |
54,584 |
|
|
$ |
(85,089 |
) |
|
$ |
(30,505 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(notional and dollars in thousands) |
|
|
|
|
|
|
|
|
December 31, 2011 |
Protection |
Maturity Date |
|
Average Implied Credit Spread |
|
Current Notional Amount |
|
Fair Value |
|
Upfront Payable |
|
Unrealized Gain/(Loss) |
Receive |
9/20/2013 |
|
460.00 |
|
|
(45,000 |
) |
|
$ |
2,422 |
|
|
$ |
(3,127 |
) |
|
$ |
(705 |
) |
|
12/20/2013 |
|
172.50 |
|
|
(105,000 |
) |
|
3,742 |
|
|
(3,225 |
) |
|
517 |
|
|
6/20/2016 |
|
105.00 |
|
|
(150,000 |
) |
|
2,074 |
|
|
(355 |
) |
|
1,719 |
|
|
12/20/2016 |
|
684.38 |
|
|
(125,000 |
) |
|
10,200 |
|
|
(13,062 |
) |
|
(2,862 |
) |
|
5/25/2046 |
|
377.23 |
|
|
(119,699 |
) |
|
67,698 |
|
|
(57,322 |
) |
|
10,376 |
|
|
Total |
|
341.94 |
|
|
(544,699 |
) |
|
$ |
86,136 |
|
|
$ |
(77,091 |
) |
|
$ |
9,045 |
|
|
| Schedule of Inverse Interest-Only Securities Reconciliation [Table Text Block] |
|
s. The following table presents the amortized cost and carrying value (which approximates fair value) of inverse interest-only securities as of September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
(in thousands) |
September 30,
2012 |
|
December 31,
2011 |
Face Value |
$ |
2,031,621 |
|
|
$ |
1,131,084 |
|
Unamortized premium |
— |
|
|
— |
|
Unamortized discount |
|
|
|
Designated credit reserve |
— |
|
|
— |
|
Net, unamortized |
(1,721,349 |
) |
|
(973,066 |
) |
Amortized Cost |
310,272 |
|
|
158,018 |
|
Gross unrealized gains |
25,009 |
|
|
4,606 |
|
Gross unrealized losses |
(6,646 |
) |
|
(7,385 |
) |
Carrying Value |
$ |
328,635 |
|
|
$ |
155,239 |
|
|
| Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] |
|
The following tables present the gross fair value and notional amounts of the Company's derivative financial instruments treated as trading instruments as of September 30, 2012 and December 31, 2011.
|
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|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
September 30, 2012 |
|
|
Derivative Assets |
|
Derivative Liabilities |
Trading instruments |
|
Fair Value |
Notional |
|
Fair Value |
Notional |
Inverse interest-only securities |
|
$ |
332,569 |
|
2,031,621 |
|
|
$ |
— |
|
— |
|
Interest rate swap agreements |
|
— |
|
— |
|
|
(132,322 |
) |
13,095,000 |
|
Credit default swap agreements |
|
54,584 |
|
610,707 |
|
|
— |
|
— |
|
Swaptions |
|
105,064 |
|
5,150,000 |
|
|
— |
|
— |
|
TBAs |
|
3,967 |
|
450,000 |
|
|
— |
|
— |
|
Forward purchase commitment |
|
604 |
|
319,931 |
|
|
— |
|
— |
|
Total |
|
$ |
496,788 |
|
8,562,259 |
|
|
$ |
(132,322 |
) |
13,095,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
December 31, 2011 |
|
|
Derivative Assets |
|
Derivative Liabilities |
Trading instruments |
|
Fair Value |
Notional |
|
Fair Value |
Notional |
Inverse interest-only securities |
|
$ |
157,421 |
|
1,131,084 |
|
|
$ |
— |
|
— |
|
Interest rate swap agreements |
|
— |
|
— |
|
|
(28,790 |
) |
5,810,000 |
|
Credit default swap agreements |
|
86,136 |
|
544,699 |
|
|
(14,638 |
) |
154,812 |
|
Swaptions |
|
5,635 |
|
2,900,000 |
|
|
— |
|
— |
|
TBAs |
|
2,664 |
|
275,000 |
|
|
(5,652 |
) |
850,000 |
|
Forward sale commitment |
|
— |
|
5,202 |
|
|
— |
|
— |
|
Total |
|
$ |
251,856 |
|
4,855,985 |
|
|
$ |
(49,080 |
) |
6,814,812 |
|
|
| Schedule of Average Notional Amounts of Derivative Positions [Table Text Block] |
|
The following table provides the average outstanding notional amounts of the Company's derivative financial instruments treated as trading instruments for the three and nine months ended September 30, 2012.
|
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|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Three Months Ended September 30, 2012 |
|
Nine Months Ended September 30, 2012 |
Trading instruments |
|
Derivative Assets |
|
Derivative Liabilities |
|
Derivative Assets |
|
Derivative Liabilities |
Inverse interest-only securities |
|
1,953,128 |
|
|
— |
|
|
1,669,944 |
|
|
— |
|
Interest rate swap agreements |
|
— |
|
|
11,327,391 |
|
|
— |
|
|
8,625,967 |
|
Credit default swaps |
|
545,611 |
|
|
48,576 |
|
|
554,568 |
|
|
91,555 |
|
Swaptions |
|
4,891,304 |
|
|
— |
|
|
3,687,328 |
|
|
— |
|
TBAs |
|
304,348 |
|
|
— |
|
|
278,741 |
|
|
564,416 |
|
Short treasuries |
|
— |
|
|
46,739 |
|
|
— |
|
|
15,693 |
|
Forward purchase commitment |
|
45,872 |
|
|
— |
|
|
15,894 |
|
|
— |
|
Forward sale commitment |
|
— |
|
|
— |
|
|
3,199 |
|
|
— |
|
|
| Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block] |
|
The following table summarizes the location and amount of gains and losses on derivative instruments reported in the condensed consolidated statement of comprehensive income on its derivative instruments:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
Trading Instruments |
|
Location of Gain/(Loss) Recognized in Income on Derivatives |
|
Amount of Gain/(Loss) Recognized in Income on Derivatives |
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
Risk Management Instruments |
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts |
|
|
|
|
|
|
|
|
|
|
Investment securities - RMBS |
|
Gain (loss) on other derivative instruments |
|
$ |
2,170 |
|
|
$ |
5,729 |
|
|
$ |
(22,817 |
) |
|
$ |
5,091 |
|
Investment securities - U.S. Treasuries and TBA contracts |
|
Loss on interest rate swap and swaption agreements |
|
(5,429 |
) |
|
6,544 |
|
|
(12,774 |
) |
|
2,733 |
|
Mortgage loans held-for-sale |
|
Gain (loss) on other derivative instruments |
|
604 |
|
|
— |
|
|
578 |
|
|
— |
|
Repurchase agreements |
|
Loss gain on interest rate swap and swaption agreements |
|
(71,043 |
) |
|
(45,855 |
) |
|
(140,905 |
) |
|
(90,913 |
) |
Credit default swaps - Receive protection |
|
Gain (loss) on other derivative instruments |
|
(18,661 |
) |
|
21,994 |
|
|
(44,187 |
) |
|
22,267 |
|
Non-Risk Management Instruments |
|
|
|
|
|
|
|
|
|
|
Credit default swaps - Provide protection |
|
Gain (loss) on other derivative instruments |
|
3,015 |
|
|
(4,414 |
) |
|
11,987 |
|
|
(5,589 |
) |
Inverse interest-only securities |
|
Gain (loss) on other derivative instruments |
|
18,094 |
|
|
(948 |
) |
|
43,154 |
|
|
15,705 |
|
Short treasuries |
|
Gain (loss) on other derivative instruments |
|
(1,768 |
) |
|
— |
|
|
(1,768 |
) |
|
— |
|
Total |
|
|
|
$ |
(73,018 |
) |
|
$ |
(16,950 |
) |
|
$ |
(166,732 |
) |
|
$ |
(50,706 |
) |
|
| Schedule of Credit Default Swaps, Provide Protection [Table Text Block] |
|
The following table presents credit default swaps where the Company is providing protection held as of December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(notional and dollars in thousands) |
|
|
|
|
|
|
|
|
December 31, 2011 |
Protection |
Maturity Date |
|
Average Implied Credit Spread |
|
Current Notional Amount |
|
Fair Value |
|
Upfront (Payable)/Receivable |
|
Unrealized Loss |
Provide |
7/25/2036 |
|
358.71 |
|
|
99,890 |
|
|
$ |
2,733 |
|
|
$ |
(11,089 |
) |
|
$ |
(8,356 |
) |
|
5/25/2046 |
|
146.18 |
|
|
54,922 |
|
|
(17,371 |
) |
|
13,574 |
|
|
(3,797 |
) |
|
|
|
289.59 |
|
|
154,812 |
|
|
$ |
(14,638 |
) |
|
$ |
2,485 |
|
|
$ |
(12,153 |
) |
|