Company: NLY-PF
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001628280-25-023811
Chunk: 3

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 2
Chunk 3
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 as officials weighed the conflicting signals from tariffs and other policy changes on economic growth and inflation. Fed officials are waiting for further evidence about an economic slowdown or higher inflation before making further adjustments to the Federal Funds Target Rate (“Fed Funds Target Rate”).

Our portfolio performed relatively well in Q1 2025, delivering a 3% economic return during the quarter. This was reflected in an increase to our common stock dividend to $0.70 per share, underscoring healthy earnings momentum, all while modestly increasing economic leverage to 5.7x at quarter end – still a leverage level at the low end of our historical range. 

With respect to our portfolio activity, we grew our Agency MBS investments by $4.4 billion market value, with most of the increase coming from additional investments to deploy the approximately $495 million equity we raised during the quarter through the at-the-market stock sale program. Unlike much of 2024, when we concentrated MBS purchases on higher coupon specified pools, a majority of Q1 purchases were in to-be-announced (“TBA”) securities in intermediate coupons. These securities offered the highest relative value following the selloff in interest rates in Q4 2024 and January 2025, with dollar roll financing on TBA contracts improving significantly. As a result, our TBA balances grew to $6.6 billion market value at the end of Q1 2025, the largest holdings in two years.

Similar to prior quarters, we continued to prudently manage our hedge position, maintaining a conservative stance with regard to our interest rate exposure. Of note, increased optimism about changes to the bank regulatory landscape drove a widening in swap spreads – the difference between Treasury and same tenor interest rate swap yields – for much of the quarter. We used this opportunity to better balance our hedge allocation between Treasuries and swaps, in turn lowering our aggregate swap notional and increasing the exposure to Treasury future hedges. In addition, we entered into a $1 billion notional 10-year payer swaption in anticipation of higher interest rate volatility. 

Our Residential Credit portfolio ended the quarter at $6.6 billion in market value, declining modestly as we opportunistically sold third-party securities early in the quarter given tight valuations and increased the pace of our securitizations. Annaly’s Onslow Bay (“OBX”) shelf closed six securitization transactions totaling $3.1 billion during the quarter, including our inaugural securitization of home equity line of