AGNC Investment Corp.

Good morning, and welcome to the AGNC Investment Corp. Second Quarter 2024 Shareholder Call. All participants will be in 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, 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 AGMC Investment Corps' second quarter 2024 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 facts, 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 could cause actual results to differ materially from those contained in the forward-looking statements are included in agencies' 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 Kuhl, Executive Vice President and Chief Investment Officer. Aaron Tass, 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 for joining our second quarter earnings call. The strong fixed income momentum that began in the fourth quarter of 2023 abated in the second quarter as the Federal Reserve and market participants looked for indications that the economy was slowing and inflation moderating. On balance, the data showed that consumer spending and confidence were weakening, the labor market was moving into better balance, and most importantly, inflation measures were trending toward the Fed's long run target. From a monetary policy perspective, this was a welcome development. Nevertheless, the Federal Reserve was unwilling to adopt a more accommodative monetary policy stance. Against this backdrop of diverging economic and monetary policy outlooks, fixed income markets became more cautious and inter-quarter volatility increased. In aggregate, interest rates edged higher and agency mortgage-backed security spreads widened, driving AGNC's negative economic return of just under 1%. In the current environment, each economic release carries elevated importance as the Fed seeks greater confidence before easing monetary policy conditions. This was clearly the case in the second quarter, with interest rates and spreads reacting sharply to each labor and inflation report. The 10-year Treasury, for example, ended the quarter just 20 basis points higher, but experienced several sharp sell-off and rally episodes during the quarter that drove a cumulative daily yield change of more than 300 basis points. For agency MBS, the second quarter was a push and pull between evolving supply and demand dynamics. On the demand side, bank and foreign demand moderated in the second quarter, while demand from bond funds remained steady but limited given an already overweight position. The modest weakening of MBS demand and associated widening of mortgage spreads was also somewhat expected as spreads ended the first quarter at the tighter end of the recent trading range. On the supply side, favorable seasonal dynamics often lead to a notable uptick in mortgage supply in the second quarter of the year. This was indeed the case this year, with $52 billion in supply in the second quarter, double the pace of the first quarter. Supply was especially heavy during the last week of the quarter. As a result, agency MBS spreads to treasuries widened five to ten basis points across the coupon stack with a good portion of that spread widening occurring over the last several days of the quarter. Production coupons, namely five and a half and sixes, experienced the greatest spread widening given the uptick in supply. Importantly, however, agency MBS continued to trade in the same relatively narrow spread range that has emerged over the last nine months. For the current coupon, that trading range has been 140 to 160 basis points to a blend of five and 10-year treasury hedges. Using a similar combination of swap hedges, that range has been 170 to 190 basis points. Spreads at quarter end to treasuries and swaps were 150 and 180 basis points respectively, right in the middle of the recent range. We continue to view this range bound trading behavior as a very positive development for agency MBS. Since quarter end, economic data has continued to be supportive of the Fed moving toward a more accommodative monetary policy stance. That shift will likely occur over the next several months and should be viewed as the beginning of a new, more favorable monetary policy cycle. To this point, in its most recent summary of economic projections, the Fed's short-term rate forecast showed a total of nine rate cuts over the next two years. As at least some of these rate cuts become a reality, the risk of meaningfully higher rates will decline. interest rate volatility will decline, and the yield curve will steepen. These will all be positive developments for the agency MBS market specifically and for fixed income more broadly. Lastly, the long-term fundamentals for agency MBS remain very favorable and continue to give us reason for optimism. In light of persistent affordability challenges and historically slow prepayment speeds, the net supply of agency MBS over the intermediate term will likely remain below previous expectations. At the same time, from a demand perspective, agency MBS provide investors with a meaningful amount of incremental yield relative to both U.S. Treasuries and investment grade corporate debt at current valuation levels. For these reasons, we continue to be very optimistic about both the current returns and the future prospects for our business. With that, I'll now turn the call over to Bernie Bell to discuss our financial results in greater detail.