AGNC Investment Corp.

Good morning and welcome to the AGNC Investment Corp. Third Quarter 2023 Shareholder Call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists 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 your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Katie Turlington in Investor Relations. Please go ahead.

Thank you all for joining AG&C Investment Corps' third 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 AGMC. 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 AGMC'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 this 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, and good morning. Despite signs of improvement early in the quarter, the sell-off in the bond market intensified in the third quarter as Treasury supply concerns and the threat of overly restrictive monetary policy weighed heavily on investor sentiment and drove benchmark interest rates and interest rate volatility materially higher. The treasury market continues to be in the midst of a historic multi-year repricing event. To put the move in context, the increase in the 10-year treasury yield over the last three years is the second largest ever recorded over such a short time period. In percentage terms, the treasury market has never experienced anything like this. The Bloomberg Long Treasury Bond Index which tracks maturities of 10 years or more, has experienced a total return loss of close to 50% over the last two and a half years, a loss equal to what the S&P 500 experienced following the dot-com bust in 2000. The move higher in Treasury rates began relatively early in the quarter as supply expectations were revised materially higher due to the growing fiscal deficit. The bearish sentiment accelerated late in the quarter following a hawkish message from the Fed that short-term rates would likely remain higher for longer. In environments like this, when Treasury prices fall abruptly and the market struggles to find its new equilibrium, agency MBS typically underperform. That was indeed the case in the third quarter as agency MBS performance relative to benchmark rates lagged meaningfully. In aggregate, agency MBS spreads to comparable duration treasuries widened 20 to 25 basis points across most of the coupon stack. Since quarter end, agency MBS have remained under pressure with spreads widening by a similar amount in October. At this point, Agency MBS spreads are close to the widest levels reached during the height of the pandemic in March of 2020. The sharp steepening of the yield curve also caused agency MBS performance to vary significantly across the yield curve. Agency MBS hedged with short and intermediate term instruments perform materially worse than agency MBS hedged with longer term instruments. The volatile market conditions that we are now experiencing are a result of a complex set of domestic and global factors. In addition, the Fed is nearing a critical inflection point in monetary policy. During these types of transitions, economic data is highly scrutinized by the market and can have an outsized impact on the trajectory of monetary policy. Once the downward trend in labor and inflation data becomes certain, a more favorable monetary policy stance will undoubtedly emerge. As challenging as this period has been for all bond market participants, the current investment opportunity in agency MBS on both an unlevered and levered basis is without question. On an unlevered basis, new production par-priced agency MBS provide investors with the opportunity to earn a yield of close to 7 percent on a security that benefits from the explicit support of the U.S. government. Importantly, this yield is now at least 150 basis points higher than every point on the Treasury yield curve and materially above highly rated corporate debt instruments. For levered investors, In addition to the very compelling base yield of close to 7%, it is becoming increasingly apparent that a new trading range is developing for agency MBS, which materially improves returns. Over the last six months, the spread between current coupon agency MBS and a blend of 5- and 10-year treasuries has ranged between 150 and 195 basis points. The average has been 170 basis points and currently the spread is near the upper end of the trading range. Like all bond market participants, our financial results have been negatively impacted by the unprecedented speed and magnitude of this Fed tightening cycle. The rapid rise in long-term interest rates, the increase in interest rate and financial market volatility, heightened geopolitical risk, and growing U.S. government dysfunction. As the Fed recently stated, however, this tightening cycle may be nearing its conclusion and the economic balance of risks is now two-sided. Although this process has taken longer and has been considerably more difficult than anticipated, we continue to believe that a durable and very attractive investment environment is still ahead of us once the uncertainties associated with the current environment subside. With that, I'll now turn the call over to Bernie Bell to discuss our financial results.