AGNC investment stock rises after Q1, plan for higher rates outlined (NASDAQ:AGNC)

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AGNC Investment (NASDAQ: AGNC) the stock is gains 5.6% in the Tuesday afternoon trading after the Mortgage REIT performed better than expected and management laid out its plans to deal with higher rates and quantitative tightening.

After Monday’s close, the company posted first-quarter net spread and dollar earnings per share of $0.72, better than the consensus estimate of $0.64.

CEO and Chairman Peter Federico described the tough conditions in the fixed income market, particularly agency mortgage-backed securities, as the Federal Reserve becomes more hawkish and begins to let its MBS holdings fall. flow out.

“As the Fed aggressively raises short-term rates and accelerates runoff from its balance sheet, we will likely remain defensive in positioning our portfolio,” Federico said on the company’s conference call.

However, “we believe that further weakness in MBS, if it occurs, will likely be characterized as an overreaction and likely represent a compelling investment opportunity for AGNC (AGNC),” he added.

The REIT is well prepared for higher short-term interest rates, Chief Financial Officer Bernice Bell said.

“Given the size of our swap position relative to our repo funding, our net spread and dollar earnings are well protected against a significant increase in short-term rates that is expected to occur over the remainder of the year” , she said.

Bell estimated that the tangible net book value is down approximately 6% from the end of the quarter, implying a GNR of approximately $12.33 versus $13.12 as of March 31, 2022. Excluding the monthly dividend of $0.12 per share which topped last week, BTIG analyst Eric Hagen estimates NAV at ~$12.10.

The analyst is relatively bullish on the MBS market. “With nominal MBS spreads on Treasuries around 125 basis points, we think the worst of the widening is probably in the rearview mirror, although there may be room for mortgages to leak further. more broadly from hedges as the Fed withdraws liquidity,” Hagen wrote in a note to clients.

View AGNC’s (AGNC) first quarter results presentation here.

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