AGNC Investment Corp.

Good morning, and welcome to the AGNC Investment Corporation first quarter 2023 shareholder call. All participants will be in a listen-only mode, and should you need any assistance during the call, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw a question, please press star, and then two. Please note that this event is being recorded. I would now like to turn the conference over to Katie Weiskarver in Investor Relations. Please go ahead.

Thank you all for joining AGNC Investment Corp's first quarter 2023 earnings call. Before we begin, I'd like to review the Safe Harbor Statement. This conference call and corresponding slide presentation contain statements that to the extent they are not recitations of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from those forecast due to the impact of many factors beyond the control of AGNC. All forward-looking statements included in this presentation are made only as of the date of this presentation and are subject to change without notice. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in AGNC's periodic reports filed with the Securities and Exchange Commission. Copies are available on the SEC's website at sec.gov. We disclaim any obligation to update our forward-looking statements unless required by law. Participants on the call include Peter Federico, director, president, and chief executive officer. Bernie Bell, executive vice president and chief financial officer. Chris Kuehl, executive vice president and chief investment officer. Aaron Pass, senior vice president, non-agency portfolio management. And Sean Reed, executive vice president, strategy and corporate development. With that, I'll turn the call over to Peter Federico.

Thank you, Katie. The performance of agency mortgage backed securities in the first half of the quarter was very strong, continuing the positive momentum that began last November. This led to a notable increase in our net asset value through mid-February. These favorable conditions, however, gave way to a more challenging investment environment in the second half of the quarter, as regional bank instability dramatically altered the macroeconomic and monetary policy outlook and led to a material increase in interest rate volatility and rapid repositioning of fixed income portfolios. As a result, the strong improvement in our net asset value early in the quarter turned into a modest decline by quarter end. Following stronger than expected economic data in January, the Fed raised the federal funds rate by 25 basis points at the February 1st meeting and indicated more hikes were likely and that short-term rates would remain higher for longer. By early March, the terminal Fed funds rate implied by the futures market approached 6%, indicating that another 100 basis points of tightening was likely. Against this backdrop, the yield curve became meaningfully inverted with the two-year to 10-year Treasury yield differential reaching negative 108 basis points in early March. This sharply inverted yield curve and more aggressive monetary policy outlook raised serious questions about bank earnings and unrealized losses on their asset portfolios. These concerns ultimately led to the abrupt failure of Silicon Valley Bank and drove a dramatic repricing in monetary policy expectations. At the peak of the banking uncertainty, meaningful rate cuts were expected over the remainder of the year rather than rate increases as previously indicated by the Fed. In this highly uncertain environment, interest rate volatility increased to crisis levels. As an example, the move index, which measures treasury market volatility, reached a 15-year high. Short-term interest rates experienced the greatest volatility with the yield on the two-year treasury dropping 61 basis points in a single day, unmatched by any day during the great financial crisis. Longer-term treasury rates were also volatile with the yield on the 10-year treasury increasing 60 basis points in February and falling by a similar amount in March. Predictably, this volatility adversely impacted agency MBS. The possibility of bank selling, which became a reality with Silicon Valley Bank, also weighed on agency MBS performance late in the quarter. Given these banking issues, the supply and demand outlook for agency MBS is now more uncertain. Over the near term, it is likely that banks will not be meaningful buyers of MBS and in some cases could be sellers. Over the last two years, the fixed income markets experienced a significant repricing as the Fed tightened monetary policy at a historic pace. Agency MBS have been uniquely impacted with the spread between the current coupon MBS and the 10-year Treasury, widening 135 basis points since April 2021. Importantly, we believe this repricing is in the late stages and that a new trading range is emerging. More specifically, we think spreads could remain at these compelling levels until this tightening cycle is well behind us. Such spread levels provide investors with meaningful incremental return and are about double the average of the last 10 years. We also believe agency MBS are attractively priced and adequately compensate investors for the volatility and uncertainty that characterize the U.S. Treasury and agency MBS markets today. In addition, for investors seeking the highest credit quality and incremental return, agency MBS provide a compelling alternative to U.S. Treasuries. As we mentioned last quarter, the path to stability is not a straight line, and the first quarter is a good reminder of that. but despite the headwinds that we encountered in March, our outlook continues to be very positive. A key driver of this optimism is our belief that our portfolio can generate mid-teen returns at current valuation levels and without spread tightening. For much of the last 15 years, we have competed with the world's largest and most price insensitive buyer of agency MBS. As the Fed, and now banks reposition their balance sheets, we find ourselves in the favorable position of being one of the few permanent capital vehicles dedicated to agency MBS at a time when valuations are historically attractive and appear poised to remain that way for some time. Also important, unlike banks, our interest rate exposure is conservatively hedged and our portfolio is fully mark-to-market. As such, when you invest in AGNC today, you are buying into a levered and hedged portfolio priced at today's historically attractive valuation levels, making this opportunity very similar to 2009, which was one of AGNC's most favorable periods. With that, I will now turn the call over to Bernie Bell to discuss our financial results in greater detail.