Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 3

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 2
Chunk 3
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 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 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.