Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 151

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 1
Chunk 151
---
 our business, refer to the section titled “Business Overview” in our most recent Annual Report on Form 10-K.

Business Environment 

The U.S. economy remained resilient in the third quarter of 2025 (“Q3 2025”), with growth roughly on pace with the prior quarter (“Q2 2025”) ahead of a government shutdown that began October 1, 2025, which has delayed official economic data for September. Growth was supported by healthy consumer spending, particularly from high earners, and strong business investment related to artificial intelligence (“AI”), despite lingering uncertainty around tariffs and immigration. Inflation remained well above the Federal Reserve’s (the “Fed”) inflation target, though the anticipated uptick in goods inflation resulting from higher tariffs has been more muted than expected thus far. However, labor market conditions weakened, with hiring slowing to roughly 30,000 jobs per month for the period between June and August 2025. Although the unemployment rate has moved only slightly higher over the same period, the Fed cut interest rates at its Federal Open Market Committee (“FOMC”) meeting in September as the outlook highlights growing risks to the Fed’s employment mandate.  

U.S. Treasury yields fell modestly in Q3 2025 and the yield curve steepened, as markets expected modestly lower policy rates going forward. In addition, concerns about the U.S. debt outlook eased following the passage of tax reform in Congress in early July 2025, robust tariff revenues – currently are running at approximately $30 billion per month – and a shift in Treasury issuance towards the front-end of the yield curve. The reduced concerns led to lower Treasury term premia and a widening in swap spreads, which benefited our portfolio given the current allocation of swaps in our hedge book. In addition, interest rate volatility declined to the lowest levels since the onset of the Fed’s hiking cycle in 2022, providing another benefit to our portfolio by lowering convexity costs and helping to tighten Agency MBS spreads.

In this environment, Annaly generated earnings available for distribution of $0.73 per share, thereby outearning our current dividend, which was raised in the first quarter of the year, for the fourth consecutive quarter – and delivered an economic return of 8.1% for Q3 2025 and 11.5% for 2025 year-to-date. Annaly’s economic leverage decreased slightly to 5.7x while cash and unencumbered Agency MBS totaled $5.9 billion, with total assets available for financing