Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 153

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 1
Chunk 153
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 swaps provides adequate compensation for assuming the risk 

40

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESItem 2. Management’s Discussion and Analysis 

of swap spread tightening. Further out the curve our hedge allocation is more balanced between swap and Treasury-based hedges, though our hedge allocation increased modestly in Q3 2025.

Overall, we remain optimistic with respect to the Agency MBS sector. While spreads have tightened meaningfully in Q3 2025, it was achieved with minimal support from banks or overseas investors. The continuation of the Fed cutting cycle should make MBS more attractive for the overseas community and potential regulatory reform is anticipated to help spur bank demand. Interest rate volatility should remain subdued as the Fed continues their path towards a neutral policy setting, while a steeper curve is likely to reduce option costs for our MBS portfolio.

Our Residential Credit business saw its portfolio increase by $265 million to $6.9 billion in economic market value of assets during the quarter. Investment grade assets in the residential credit market tightened during the quarter with Non-QM “AAA”-rated securities roughly 15 bps tighter, providing a supportive backdrop for securitization issuance, which is running at the second largest gross issuance since 2008 at $160 billion year-to-date. Within this environment, we believe Onslow Bay’s securitization platform continues to be well positioned to benefit from the growth of the private label market, demonstrated by closing a record eight securitizations for $3.9 billion in unpaid principal balance (“UPB”) in Q3 2025, generating $479 million of high yielding, proprietary securities for Annaly and our joint venture. Onslow Bay has now priced 24 securitizations, including 3 after the end of the third quarter, representing $12.4 billion of UPB since the beginning of 2025, solidifying Annaly as the largest non-bank issuer in the residential credit market.

The strong securitization volumes came as the Onslow Bay correspondent channel also achieved record setting quarterly volumes across both loan locks and fundings, while remaining disciplined regarding our credit strategy. The correspondent channel locked $6.2 billion and funded $4.0 billion in whole loans in Q3 2025 with the quarter end locked pipeline representing a 765 weighted-average FICO score, a 68% weighted-average combined loan-to-value ratio and over 96% first lien exposure. In addition, Annaly redeemed OBX 2022-N