Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| Our exposure on the short end is greater than on the long end such that if you have a steepener in a bear market, meaning the 10-year rates go up, we are in a better position than we would have been on the first day of the third quarter |
| Despite the tough market conditions recently, we remain very constructive on the MPS market and its potential as we move towards the end of the Fed tightening cycle |
| So we want to have enough dry powder that we can withstand rates continuing to rise and spreads continue to widen, but enough leverage on that when things go the other way, we are able to take that advantage and see the increase in book value |
| And our liquidity is quite good right now |
| Improving the profile of the portfolio through the shorter cash flows of Ginnie Collateral |
| This timely strategic shift enhanced our portfolio resilience to rise in treasury yields and MBS duration extension, while improving our liquidity |
| We expect selling pressures to begin to subside, and this risk profile should benefit from even a modest improvement in current market conditions |
| The resulting dividend rate is extremely high for conditions today, a level beyond what can be earned with reasonable risk |
| Additionally, ARMOUR maintains healthy levels of available liquidity |
| These belly coupons have outperformed on a relative basis |
| It's important to note against this backdrop that the market is offering once-in-a-decade opportunities to invest in Agency MBS with compelling returns and no appreciable credit risk |
| treasuries and makes them particularly attractive to banks and overseas investors |
| All in, these trades allowed our portfolio to be more flexible in the face of a less predictable market environment |
| Jim Mountain was very explicit in his comments, though, that blackout ends on Monday and the Board authority has increased our ability to repurchase shares |
| So our perspective on mortgages, while we thought at the end of the second quarter, they were exceedingly attractive |
| So mid-teens where we see current opportunities |
| They are exceedingly more attractive today |
| So we see large returns in MBS somewhere in the mid-teens, and that's even before you add the hedges, which are going to be positive carry based on the inverted yield curve, which could add another 500 basis points of cases |
| While we acknowledge DUS spreads are at recent wide, we execute these trades due to DUS outperformance versus MBS pools over the last two months |
| And in the meantime, stay safe |
| We plan to eventually reinvest these proceeds into more attractive higher coupons with higher yields and wider spread characteristics |
| We appreciate your interest in ARMOUR Residential REIT |
| Jeffrey Zimmer So, good morning |
| In response to the increased market volatility, ARMOUR took measured steps towards a more conservative portfolio risk profile in order to safeguard our capital in this turbulent environment |
| Good morning |
| So that's deliverable, and frankly, if you wanted to raise your number from 8 to 9 on the leverage, it increases it by probably another 150 basis points |
| Jeffrey Zimmer Thank you |
| Despite seasonal effects driving CPR is marginally higher, the overall mortgage refinancing activity remains at historically low prepayment loans |
| And as Scott said in his remarks, we did several trades in Q3, as the things we're selling off and our leverage was increasing to decrease leverage and decrease risk |
| We believe that much of this selling is driven by investors' existing overweight exposure to mortgage allocations relative to other investments |
| Statement |
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| As a result, there have been broader investment -- investor redemptions in various bond funds, adding to the significant price pressures in the agency MBS market |
| At the end of the third quarter and beginning of the fourth quarter presented some of the most difficult conditions for mortgage-backed securities since the onset of COVID-19 in March of 2020 |
| The widening in OAS caused mortgage assets to underperform similar duration treasuries even further |
| Reason for the decline in net interest income quarter-over-quarter given investment margins were relatively flat and your agency volumes went up since last quarter |
| ARMOUR's Q3 GAAP net loss was $179.2 million |
| Our current book value of $17.95 as of October 24, fully reflects this decline in agency mortgage prices |
| We've seen a significant decline in MBS prices primarily because of the nearly 125 basis point increase in 10-year treasury yields trough to peak since June 30 |
| However, the market value decline of ARMOUR REIT common shares seems to have substantially overshot this book value movement |
| I doubt you would see us getting much over 8 in the current environment |
| But we still want to have enough risk on when things turn, we are in a position that we could take advantage of that |
| But as I said in my comments a minute ago, we continue to be cognizant of the downside |
| And we don't want to get over our skis and have to force to sell assets because our leverage gets too high |
| The treasury and mortgage markets have continued to be highly volatile since then |
| However, Trevor, we think they're less than perhaps what they were four to six weeks ago |
| However, there will be a point that would fund reductions will slow down |
| So I mean even 6.5 are well below par right now |
| And if we weren't to see that scenario, generally, how do you think we see MBS perform in that backdrop? Thanks |
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