Oct 20, 2026 earnings call — Q3 results and Agency MBS outlook
AGNC reported an economic return of -12.7% and a comprehensive loss of $1.28 per common share for the quarter.
Revenue $1.2B (est $1.1B) · EPS $0.37 (est $0.37)
Key quotes
"At quarter end, the yield on a new production current coupon Agency MBS was close to 6.5%, which, for a security backed by the support of the U.S. government, should be appealing to a wide range of investors."
"Through these actions, our duration gap at quarter end was little changed at 0.8 years."
"We took advantage of this outsized liquidity to issue $992 million of common stock through our at-the-market offering program at a significant premium to tangible net book value."
Analyst Q&A 8
Treasury market stability and mortgage returns
Q (Crispin Love · Piper Sandler): Analyst asked how Treasury market instability in Q3 compares to October and whether broader market moves could help AGNC. He also asked for updated return expectations after heavy issuance and the quarter's ATM activity.
A: Management said the market may be consolidating into a new 4.90-5.40 range after bumping repeatedly against 5.30-5.35, and overseas moves helped the rally. They said Agency MBS fundamentals look strong, expect heavy fixed income inflows, and gave expected levered ROE around 18%-20% for mortgages trading at current levels.
"I think the important trading behavior that we've seen since quarter end is that we've bumped up against that 5.30, 5.35 range probably on 4, maybe even on 5 occasions." — Peter Federico (CEO)
Why mortgage spreads remain wide
Q (Marissa Lobo · UBS): Analyst asked whether current wide spreads reflect excessive compensation for rate volatility or something else. She also asked how AGNC will use its ATM if the premium to book narrows and whether that would hinder deployment.
A: Management said the mortgage market took extra pressure from duration extension, forced liquidations and lower liquidity after the big rate move, noting mortgage durations moved almost a full year in the quarter. They said the ATM gave flexibility due to S&P 400 inclusion and about $1.5 billion of one-time demand, and future ATM use will depend on premium levels and market conditions.
"Mortgage durations moved on average almost a full year in the quarter." — Peter Federico (CEO)
Leverage outlook and appetite to add
Q (Doug Harter · BTIG): Analyst asked whether management is comfortable with current leverage, if it could go up or down, and whether there is appetite to proactively add leverage and assets in this environment.
A: Management said they set leverage so it can withstand positive and adverse market moves and avoid forced asset changes; they entered the period with appropriate leverage and did not have to adjust assets during the quarter. They said they have capacity to operate at higher leverage opportunistically, but will act when they see enough signs of market stability.
"We have plenty of capacity to operate at higher leverage should the market push us there." — Peter Federico (CEO)
Dividend level and Fed hikes impact
Q (Trevor Cranston · Citizens JMP): Analyst asked if the dividend level is still appropriate and whether Fed hikes priced into the market would change management's view on the dividend.
A: Management said Fed moves would not meaningfully change their view and their hedge position gives little exposure to short-term rate moves. They said the dividend remains aligned with the business economics: the existing portfolio generated $0.37 of net spread and dollar roll income on an ROE basis (~20%), and new business comes on around 19% ROE, consistent with total cost of capital near 19%.
"On that basis, our hedge ratio was 97%." — Peter Federico (CEO)
Hedging approach and TBA usage
Q (Hong Zhang · JP Morgan): Analyst asked whether the higher hedge ratio this quarter was tactical or structural and what drove the decline in net TBA exposure and future TBA use.
A: Management said the hedging was tactical, driven by the quarter's rate moves and the need for delta hedging to offset a roughly one-year mortgage duration extension and keep their duration gap near 0.8 years. They said TBA use fell because they rotated into specified pools where attractive payups existed and took delivery on some TBA positions to gain better repo funding, and they expect less TBA going forward as dollar-roll specialness has compressed toward historical norms (about 10-20 basis points).
"I would say it's more tactical in that because of the way the rates moved and trended, the long-term rates during the quarter, it was a quarter where delta hedging was really important." — Peter Federico (CEO)
Capital deployment timing and index inclusion
Q (Jason Weaver · JonesTrading): Analyst asked when the raised capital was deployed during the quarter, whether the company is fully deployed, when the $992 million was raised, and whether S&P inclusion will materially lower cost of capital and change ATM use.
A: Management said they are not fully deployed and timing of future deployment is market- and opportunity-driven, so they will report deployments after the fact. They said the $992 million was raised at an average price of $10.17, and S&P 400 inclusion created about $1.5 billion of one-time demand and should be a persistent new source of buyers going forward.
"We are not fully deployed already, and I cannot speak of the timing of it." — Peter Federico (CEO)
Earnings drag and deployment markers
Q (Jason Stewart · Compass Point): Analyst asked how much the third-quarter deployments dragged on earnings and what markers (macro stability, GSE buying, etc.) management needs to fully deploy capital.
A: Management said the drag was small, about a penny, tied to deploying roughly $2 billion (about 20%-25% of the capital) during the quarter. They said they need confidence in the new Treasury range, clarity from upcoming Fed meetings and economic data, and expect GSEs likely bought in September and could be active in the fourth quarter, possibly returning to Q1 acquisition pace (~$12 billion per month).
"I would say it's maybe in the neighborhood of a penny, since we deployed essentially $2 billion, maybe 20%-25% of the capital, something like that." — Peter Federico (CEO)
Hedge mix: swaps versus Treasuries
Q (Bose George · KBW): Analyst asked about the current mix between swaps and Treasury hedges and management's view on swap spreads and future hedge composition.
A: Management said heavy delta hedging in the quarter was done mostly in Treasuries, which pushed their swaps share down to the high fifties (about 58%-60%), below the long-run mix. They expect to rotate back toward more swap-based hedges over time (they typically model 80/20), and said new mortgage purchases will likely be hedged with 100% swaps.
"I think at the end of the quarter, we were in high fifties, maybe 58, maybe 60% of swaps versus Treasuries." — Peter Federico (CEO)