Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 152

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 1
Chunk 152
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 increasing to $8.8 billion during the quarter. Moreover, we remained opportunistic in the capital markets by raising approximately $1.1 billion of equity in the third quarter, including $823 million through our at-the-market sales program. We also issued Annaly’s first preferred stock issuance since 2019, and the first non-rated residential mortgage REIT preferred issuance since September 2022, raising $275 million in gross proceeds before deducting the underwriting discount and other estimated offering expenses. While all three of our businesses grew over the quarter, most of the new capital was deployed into MBS given lower realized interest rate and mortgage basis volatility and still historically attractive spreads relative to swap hedges. 

Our Agency MBS portfolio ended the quarter at $87.3 billion in market value, up 10% quarter-over-quarter, as MBS performance was supported by the constructive macro backdrop. Early in the quarter, we added MBS in line with our accretive capital raise across the coupon stack and added roughly $1.1 billion in Agency CMBS. However, as higher coupons started to look more attractive, we favored specified pools in 5.5% and 6.0% coupons to further our methodical portfolio construction of recent quarters. As of September 30, 2025, nearly three-quarters of our 6.0% coupon specified pool holdings and 95% of our 6.5% coupon specified pool holdings have medium-to-high quality characteristics that provide call protection as rates rally.

Supply and demand technical factors continued to improve in the Agency MBS sector as fixed income flows were an estimated 50% higher than the same quarter a year ago. In addition, CMO creation has been running at over $30 billion per month, which has helped distribute MBS supply to a wider range of investors. Mortgage spreads tightened by 8 to 12 basis points (“bps”) relative to Treasury hedges over the course of the quarter, with lower and intermediate coupons showing the strongest performance. As mortgage rates declined to the lowest levels in nearly a year, investors increased their prepayment expectations on recently issued higher coupon mortgages, in turn shortening the duration of the securities and negatively impacting their return potential. This quickly shifted investor demand from production coupons to lower and intermediate coupons, with little recent production driving them to outperform. 

Within our hedge portfolio, we added hedges alongside new asset purchases, with a bias toward swap hedges in the front end of the yield curve. The additional interest income from hedging with