Company: NLY-PF
Filing Date: 2025-02-13
Form Type: 10-K
Source: 0001628280-25-005451
Chunk: 11

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-02-13
Form: 10-K
Item: Item 7
Chunk 11
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, given the lower Fed Funds Rate and relatively less movement in long-term Treasury rates, the yield curve steepened, with the 2-year 10-year Treasury spread, the difference between yields of those maturities, turning positive for the first time in over two years. In addition, long-term Treasuries appeared increasingly driven by investors’ increased demand for compensation to hold longer maturity securities, with rising term premia driving much of the increase in long-term Treasury yields seen in 2024. Additionally, the U.S. presidential election outcome amplified the rise in term premia, as expectations for a permanent extension of the 2017 “Tax Cuts and Jobs Act” was estimated to further increase the U.S. budget deficit according to estimates by the Congressional Budget Office. 

Meanwhile, residential investment slowed as high mortgage rates curbed demand for housing and housing construction, particularly in the second half of the year. In this economic environment, the housing market saw limited changes in aggregate as inventories and activity remain subdued relative to the pre-pandemic averages, which supported home prices. National home prices rose roughly 3.0% in 2024. Historically low affordability for prospective homeowners, as mortgage rates remained above 

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESItem 7. Management’s Discussion and Analysis

6.0% for nearly the entire year and existing homeowners’ inability to move homes without a meaningful increase in housing costs (the so called “lock in effect”), have supported home prices at low levels of sales turnover. However, there has been increased regional differentiation, with larger growth in supply in states and cities in the Southern and Western United States, which in turn saw price changes below the national average. Areas of home price weakness generally correspond to areas with easier zoning restrictions and greater ability to build new homes, though many of them also saw more notable price increases following the pandemic driven by housing shortages and outsized population growth. 

In this environment, Annaly generated an 11.9% economic return in 2024, underscoring the efficacy of our diversified housing finance model and our disciplined portfolio and risk management. We proactively managed our leverage profile throughout the year, reducing aggregate leverage modestly from 5.7x at the end of 2023 to 5.5x at the end of 2024. Similar to 2023, a portion of the reduced leverage is driven by further diversification into the Residential Credit and mortgage servicing rights (“MSR”) businesses