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    AGNC
    Earnings call· Mar 2026(Q1 FY26)

    AGNC Investment Q1 FY26 earnings call AGNC

    Apr 21, 2026 Source

    Executive summary

    AGNC Investment Corp. Q1 FY26 — MBS Spreads Widen Amid Geopolitical Uncertainty, Book Value Recovers in April

    AGNC navigated a volatile Q1 FY26 marked by geopolitical tensions and widening mortgage spreads, resulting in a negative economic return. However, the company's book value largely recovered in April, supported by improved net spread income and strategic capital raises. Management maintains a favorable outlook for Agency MBS, anticipating tighter spreads and lower rates.

    Highlights

    4

    • Net spread and dollar roll income increased to $0.42 per common share, up $0.07 from Q4.

    • Net interest spread increased 25 basis points to 2.06%.

    • Tangible net book value per common share was up approximately 6% for April, largely reversing the Q1 decline.

    • Issued $401 million of common equity at a significant premium to tangible net book value, generating accretion.

    Concerns

    3

    • Economic return on tangible common equity was negative 1.6% for the quarter.

    • Tangible net book value per share decreased $0.50 due to wider mortgage spreads to benchmark rates.

    • Interest rate volatility increased and Fed rate cuts became more uncertain due to the Middle East conflict.

    Guidance & targets

    1
    CategoryTargetConfidence
    Net spread and dollar roll income
    high 30s and low 40s
    medium materiality
    Medium

    Operational metrics

    26
    Economic return on tangible common equity
    -1.6%
    Q1 FY26
    Tangible net book value per common share decrease
    $0.50
    Q1 FY26

    Decrease driven by wider mortgage spreads to benchmark rates.

    Tangible net book value per common share increase
    6%
    April

    Increase for April, or 5% net of monthly dividend accrual, largely reversing the first quarter decline.

    Leverage
    7.4xup slightly from 7.2x as of Q4
    Q1 FY26 end
    Average leverage
    7.4xunchanged
    Q1 FY26
    Unencumbered cash and Agency MBS liquidity
    $7 billion
    Q1 FY26 end
    Net spread and dollar roll income
    $0.42up $0.07 from Q4
    Q1 FY26
    Net interest spread
    2.06%up 25 basis points
    Q1 FY26

    Driven by greater allocation of interest rate swaps, lower repo funding costs, more favorable TBA implied financing levels, and a modest increase in asset portfolio yield.

    Average projected life CPR
    10.3%increased 70 basis points from 9.6% as of Q4
    Q1 FY26 end

    Increase due to prepayment model updates and portfolio composition changes, partly offset by higher mortgage rates.

    Actual CPRs
    13.2%compared to 9.7% in the prior quarter
    Q1 FY26
    Common equity issued (ATM program)
    $401 million
    Q1 FY26

    Issued at a significant premium to tangible net book value per share, generating meaningful accretion.

    Portfolio market value
    $95 billion
    Q1 FY26 end
    Purchases of specified pools
    $1.7 billion
    Q1 FY26
    Weighted average coupon on portfolio
    4.95%declined from 5.12% the prior quarter
    Q1 FY26 end

    Due to rotation of a portion of the portfolio down in coupon.

    Percentage of assets with favorable prepayment characteristics
    77%increased slightly
    Q1 FY26 end
    Notional balance of hedge portfolio
    $64 billion
    Q1 FY26 end

    Increased due to the addition of shorter-term pay fixed swaps prior to the sharp sell-off in interest rates in March.

    Swap hedge allocation
    78%increased from 70% the prior quarter
    Q1 FY26 end
    Current coupon MBS to blend of swaps spread
    151 bps
    Call date

    As of the morning of the call.

    Current coupon MBS to treasuries spread
    120 bps
    Call date

    As of the morning of the call.

    Implied ROE at current spreads
    15-17%
    Current

    Centered around 16%, aligning with total cost of capital.

    MBS supply reduction
    $50-70 billionfrom initial expectation of $250 billion
    FY26

    Expected due to mortgage rates being about 50 basis points higher.

    Bond fund inflows
    about double the pace of the previous 2 years
    Q1 FY26

    Materially faster in Q1, driving outperformance of lower coupon MBS.

    Bond fund inflows
    probably running slower than the pace of the previous 2 years
    Q2 FY26 YTD

    Management noted a slowdown in Q2 to date.

    Net hedge ratio (net of receiver swaptions)
    8%
    Current

    Positions the company to benefit from lower short-term rates.

    Dividend declared per common share
    $0.36
    Q1 FY26
    Dividend yield on stock
    13.5%
    Current

    Industry KPIs

    1
    MetricValueDetails
    Investment volume closed$1.7 billionUSD

    Risks & headwinds

    2
    Geopolitical uncertainty (Middle East conflict)Q1 FY26, ongoing

    Caused interest rate volatility to increase, investor sentiment to turn negative, and Agency MBS spreads to widen significantly.

    Mitigation: Management hopes for a prompt resolution, which could lead to a substantial reduction in volatility and inflationary pressures.

    Fed rate cut uncertaintyNear-term

    Increased due to the Middle East conflict, with market expectations shifting from multiple rate cuts to potential tightening at one point.

    Mitigation: Management believes underlying fundamentals will eventually lead to a more accommodative monetary policy stance later in the year.

    What to watch in Q2 FY26

    4

    Resolution of Middle East conflict

    Next quarter
    CurrentOngoing conflict, increased volatility
    TargetPrompt resolution, reduction in volatility and inflationary pressures

    Why it matters

    A prompt resolution is expected to reduce volatility and inflationary pressures, positively impacting Agency MBS performance.

    A prompt resolution to the Middle East conflict while at times difficult to predict📌 could lead to a substantial reduction in volatility and inflationary pressures.

    Q&A highlights

    6

    Given the book value recovery, what is the current implied ROE from mortgage spreads?

    Peter Federico stated that current spreads (140-150 basis points to the swap curve) imply returns broadly in the 15% to 17% range, centered around 16%, which aligns with their total cost of capital.

    “And at that level, I would say returns are kind of broadly in the 15% to 17% range. centered right around 16%, which aligns pretty well with our total cost of capital.”

    asked by Bose George · answered by Peter Federico

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 Market Dynamics

    Agency MBS performance was mixed in Q1 FY26. January and February saw strong performance driven by a directive for GSEs to purchase $200 billion of MBS, pushing spreads tighter. However, March experienced significant spread widening due to increased geopolitical risk from the Middle East conflict and rising interest rate volatility, resulting in AGNC's negative 1.6% economic return for the quarter.

    02

    MBS Outlook and Value Proposition

    Despite near-term challenges, the outlook for Agency MBS is favorable. Current spread levels, ranging from 150 to 175 basis points to a blend of swaps, represent compelling value, implying returns in the 15-17% range. The supply outlook improved with an expected $50-$70 billion reduction in MBS supply for FY26 due to higher mortgage rates, while demand is strengthening from money managers and potentially banks due to favorable capital requirements.

    03

    TBA Market Improvement

    The TBA (To-Be-Announced) market has seen a significant positive shift, with implied financing levels generally returning to or exceeding repo levels. This improvement, a stark contrast to the past two years, is attributed to easing balance sheet pressures, the Fed's reserve management purchases, and reforms to Basel Endgame. This creates a new opportunity for AGNC to profit from TBA positions and deploy capital efficiently.

    04

    Hedge Strategy and Leverage Management

    AGNC maintains a positive duration gap, which is viewed as additional prepayment protection in a down-rate scenario. The hedge ratio, net of receiver swaptions, is approximately 8%, positioning the company to benefit from potential lower short-term rates. Leverage remained stable at 7.4x, allowing AGNC to navigate market volatility🌐 and generate strong shareholder returns while preserving book value.

    05

    Strategic Capital Management

    In Q1, AGNC issued $401 million of common equity through its at-the-market (ATM) offering program. This capital raise, executed at a significant premium to tangible net book value, was accretive to both book value and earnings per share. The company deployed most of these proceeds at attractive return levels, enhancing its financial flexibility and liquidity during a volatile period.

    AI-generated summary of the company’s earnings call. Not investment advice.