AGNC Investment Corp. Q1 FY2024 earnings call

• Positive monetary policy developments: Fed members saw short-term rates likely at peak, and indicated move to less restrictive stance; Fed to reduce treasury portfolio runoff. - Negative development: Stronger economic data made rate cut timing uncertain. - Interest rate volatility declined, Agency MBS spreads mixed, supply/demand favorable in Q1. - April saw volatility due to inflation and geopolitics, but expected short-lived. - Portfolio increased $3.1 billion, TBA position and hedge portfolio details discussed, including shift to swap-based hedges.

AGNC generated an economic return of 5.7% in the first quarter. Agency MBS performance across the coupon stack was mixed: lower coupon securities spreads widened, higher coupon securities spreads tightened. The portfolio increased from $60.2 billion at the start of the year to $63.3 billion as of March 31. The TBA position ended the quarter at $8.4 billion, with Ginnie Mae TBA representing approximately $5.2 billion. The hedge portfolio totaled $56.3 billion as of March 31.

• Believes current fixed income market turbulence will be short-lived. - Long-term fundamentals for Agency MBS favorable. - Fed likely to reduce treasury runoff, but rate cut timing uncertain. - Net interest margin expected to align with economic return over time, dictating dividend policy.

• Stronger-than-expected economic data affecting rate cut timing. - Geopolitical risks causing market volatility. - Inflation developments potentially changing Fed policy direction.

Q: Can you contrast leverage today and how it might move given book value weakness and ability to add assets?

A: Have strong liquidity ($5.4 billion, 67% of tangible equity), but disciplined in capital deployment. Confidence growing, will be opportunistic with capital markets activities if accretive to shareholders.

Q: Was the $25 million share issuance weighted throughout the quarter or towards beginning/end?

A: Usually don't give detailed timing, but ATM program provides flexibility to deploy proceeds immediately into mortgage market, adding ~$3 billion in Agency MBS during quarter.

Q: What are your thoughts on Fed's reduction in Q2 and its impact on portfolio and hedging strategy?

A: Expect Fed to cut treasury cap by half next week, likely no change to mortgage cap. Will continue to evaluate capital structure and optimize cost of capital, with preferred series callable but still generating value for common shareholders.