AGNC Investment Corp.

Good morning, everyone, and welcome to the AGMC Investment Court fourth quarter 2023 shareholder call. All participants will be in a listen-only mode. Should you need assistance, 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 and then one on your touchtone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Katie Turlington in investor relations. Ma'am, please go ahead.

Thank you all for joining AG&C Investment Corp's fourth 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 Post, 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.

Good morning, and thank you all for joining our call. The fourth quarter of 2023 illustrated the importance of our active portfolio management strategy as AGNC generated a very favorable 12% economic return despite significant intra-quarter volatility. Over the last two years, the Federal Reserve has engineered one of the most aggressive tightening campaigns ever experienced, raising the federal funds rate by 525 basis points while simultaneously reducing its balance sheet by $1.3 trillion. Despite this challenging and volatile fixed income environment, AGNC generated a positive economic return of 3% in 2023, produced a positive total stock return of 10%, and importantly, provided shareholders with a stable and compelling monthly dividend. Early in the quarter, Treasury supply concerns and persistent monetary policy uncertainty weighed heavily on the fixed income market, driving the yield on the 10-year Treasury and the current coupon agency MBS to 15-year highs of 5% and 7% respectively. Later in the quarter, better than expected economic data and the Fed's monetary policy pivot triggered a dramatic rally across the fixed income and equity markets as investors sought to lock in attractive return opportunities. To put the fixed income rally in perspective, From the peak in yields on October 19th through the end of the year, Treasury rates rallied by more than 100 basis points across the yield curve, and the Bloomberg Aggregate Bond Index posted a total return of close to 10% over that time period. The performance of agency MBS closely tracked Treasury yields, underperforming early in the quarter as interest rates increased and outperforming later in the quarter as interest rates fell. Agency MBS spreads hit their widest level at the same time Treasury yields peaked in mid-October. In November and December, as Treasury rates fell, agency MBS spreads tightened meaningfully across the coupon stack. As we begin 2024, we believe the investment outlook for agency MBS is decidedly more favorable than the previous two years. This positive outlook is supported by historically attractive valuation levels on both an absolute and relative basis. Low mortgage origination volumes, declining interest rate volatility, a less inverted yield curve, and most importantly, a more investor-friendly monetary policy stance by the Federal Reserve. Our favorable outlook for agency MBS is further supported by several important developments. First, in the fourth quarter, the Fed adopted a more neutral monetary policy stance as inflation measures continued to show progress toward the Fed's long-run target. More significantly, at the December meeting, the Fed also indicated that multiple rate cuts were possible in 2024. assuming inflation measures continue to improve as expected. Second, interest rate volatility is poised to decline. Over the last two years, the distribution of potential interest rate paths has been exceedingly wide due to the many uncertainties associated with inflation, the economy, regional banks, fiscal policy, geopolitical events, and of course, the Fed's unprecedented dual-track approach to monetary policy tightening. Not surprisingly, these major uncertainties led to a meaningful increase in interest rate volatility. The move index, which is a broad measure of interest rate volatility, continues to trade more than 50% above its 10-year historical average. Although some uncertainties still remain, we expect interest rate volatility to gradually decline as many of these factors are now largely behind us. Such a decline would be beneficial to agency MBS and on balance would incrementally reduce the need for and cost of our interest rate risk management activities. The third and final development relates to agency MBS spreads. Over the last five quarters, Agency MBS spreads to benchmark rates have experienced five distinct widening episodes, the most recent one being this past fall. In each of these episodes, the spread range was relatively consistent. As measured by the current coupon agency MBS spread to a blend of five and 10-year treasuries, the range has been between 140 and 190 basis points. The important takeaway from this experience is that strong incremental demand for agency MBS emerges when spreads are near the upper end of the range. In the fourth quarter, we hit the upper end of the range, and again, the range held. Spreads in this range are materially above the average of the last 10 years, make agency MBS very compelling on both an absolute and relative basis, and we believe are sufficient to attract a greater amount of private capital to the agency MBS market over time. These are positive developments and we are excited about the outlook for our business. As a levered investor in agency MBS, the two primary drivers of our performance are changes in spreads and interest rate volatility. Over the last two years, as the Fed aggressively tightened monetary policy, agency MBS spreads widened by more than 100 basis points, and interest rates and interest rate volatility moved sharply higher. Today, we believe many of the factors that drove these adverse conditions are largely behind us. Historically attractive and stable agency MBS spreads combined with declining interest rate volatility create a compelling investment environment for AGNC, and form the basis of our positive investment outlook. With that, I'll now turn the call over to Bernie Bell to discuss our financial results in greater detail.