Company: NLY-PF
Filing Date: 2025-07-30
Form Type: 10-Q
Source: 0001628280-25-036724
Chunk: 7

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-07-30
Form: 10-Q
Item: Part I, Item 2
Chunk 7
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 Fed Chair Jerome Powell has emphasized that the FOMC is in no rush to move policy in either direction, as it is still assessing the appropriate monetary policy response to tariffs. Forecasts from the FOMC meeting in June show a median of two 25 basis point interest rate cuts for 2025. Moreover, the updated economic forecast now expects slower growth, higher unemployment and more persistent inflation over the next year. As a result, the 2026 and 2027 Fed Funds rate forecast each moved up by 25 basis points. Meanwhile, regarding the FOMC’s balance sheet policy, the Fed did not make any additional announcements and maintained its monthly redemption cap of Treasury and Agency MBS holdings at $5 billion and $35 billion, respectively.

A solid economic backdrop combined with tariff-related inflation concerns contributed to a steepening of the Treasury yield curve, as longer-term Treasury rates rose in the quarter. This increase in Treasury yields, relative to more stable interest rate swap yields, led to a tightening in swap spreads. Meanwhile, as the FOMC maintains an on-hold approach to policy, interest rate volatility declined. The 10-year U.S. Treasury yield rose slightly from 4.21% on March 31, 2025, to 4.23% on June 30, 2025. Given lower rates and reduced volatility, the mortgage basis, or the spread between the 30-year Agency MBS coupon and 10-year U.S. Treasury rate, tightened slightly from 130 basis points at the end of the first quarter to 125 basis points at the end of the second quarter.

The following table presents interest rates and spreads at each date presented:

 June 30, 2025March 31, 2025December 31, 2024June 30, 202430-Year mortgage current coupon5.48%5.51%5.83%5.87%Mortgage basis125 bps130 bps126 bps147 bps10-Year U.S. Treasury rate4.23%4.21%4.57%4.40%OIS SOFR Swaps1-Month4.33%4.32%4.32%5.33%6-Month4.15%4.18%4.25%5.26%

Results of Operations

The results of our operations are affected by various factors, many of which are beyond our control. Certain of such risks and uncertainties are described herein (see “Special Note Regarding Forward