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    AGNC
    Earnings call· Jun 2026(Q2 FY26)

    AGNC Investment Corp. AGNC

    Jul 21, 2026 Source

    Executive summary

    AGNC Investment Corp. Q2 FY26 — Strong Economic Return Amidst Geopolitical Uncertainty

    AGNC navigated a challenging Q2 FY26 marked by geopolitical tensions and shifting monetary policy expectations, yet delivered a robust 6.7% economic return on tangible common equity. The company benefited from strong Agency MBS performance driven by favorable supply-demand dynamics and disciplined risk management. Management remains opportunistic in capital allocation, balancing market conditions with shareholder value.

    Highlights

    5

    • Generated a strong economic return of 6.7% on tangible common equity.

    • Tangible net book value per share increased by $0.20.

    • Agency MBS generated positive excess return to U.S. treasuries for the fifth consecutive quarter.

    • Net new supply of Agency MBS expected to drop to $150 billion, materially lower than initial estimates.

    • Maintained 75th consecutive monthly dividend payment of $0.12 per share.

    Concerns

    4

    • Investment environment continued to be challenging due to escalating geopolitical rhetoric and hostilities.

    • Treasury yields increased, yield curve flattened, and market pivoted to rate hikes by year-end.

    • Net spread and dollar roll income decreased to $0.40 per common share, down $0.02 from Q1.

    • Net interest spread declined by 6 basis points due to lower asset yields from portfolio repositioning.

    Operational metrics

    33
    Economic return on tangible common equity
    6.7%
    Q2 FY26

    Comprised of attractive monthly dividend and improvement in tangible book value per common share.

    Dividends declared per common share
    $0.36
    Q2 FY26
    Increase in tangible net book value per share
    $0.20
    Q2 FY26
    Total stock return
    12.3%
    Q2 FY26
    1-year total stock return
    36.1%
    1-year
    Tangible net book value per common share change
    down 1%
    July

    As of late last week.

    Ending leverage
    7.4xunchanged
    Q2 FY26
    Average leverage
    7.4xunchanged
    Q2 FY26
    Unencumbered cash and Agency MBS
    $7.5 billion
    Q2 FY26
    Unencumbered cash and Agency MBS as % of tangible equity
    62%
    Q2 FY26
    Net spread and dollar roll income per common share
    $0.40down $0.02 from Q1
    Q2 FY26
    Net interest spread decline
    6
    Q2 FY26
    Average projected life CPR
    8.6%decreased by 170 basis points
    Q2 FY26 end
    Actual CPRs
    13%largely unchanged
    Q2 FY26
    Common equity issued through ATM program
    $167 million
    Q2 FY26

    at a significant premium to tangible net book value per share

    Spread differential between current coupon MBS and blend of hedges
    145
    Q2 FY26 end

    Trading near the middle of expected range of 120 to 160 basis points.

    Market value of asset portfolio
    $97 billion
    Q2 FY26 end
    Purchases of specified pools
    $2.2 billion
    Q2 FY26
    Weighted average coupon on portfolio
    5.04%increased
    Q2 FY26 end
    Percentage of assets with favorable prepayment characteristics
    79%increased slightly
    Q2 FY26 end
    Notional balance of hedge portfolio
    $66 billionup slightly from prior quarter
    Q2 FY26 end
    Overall portfolio allocation to swap-based hedges
    66%declined
    Q2 FY26 end
    Duration gap
    0.7 yearsunchanged from prior quarter
    Q2 FY26 end
    Monthly common stock dividend
    $0.12
    monthly
    Marginal ROEs on new investment opportunities
    15% to 17%
    current environment
    Mortgage spreads to treasuries
    120
    current

    As of this morning.

    Mortgage spreads to swap curve
    150
    current

    As of this morning.

    GSE purchase activity remaining
    $120 billion
    going forward

    Dry powder.

    Fed balance sheet
    $8.4 trillion
    peak
    Fed balance sheet
    under $6.4 trillion
    current
    Fed balance sheet growth
    $10 billion
    monthly

    For reserve management.

    Bank reserves
    $3 trillion
    current
    Comprehensive income per common share
    $0.52
    Q2 FY26

    Risks & headwinds

    4
    Geopolitical uncertainty and hostilitiesQ2 FY26, ongoing

    Elevated energy prices, supply chain disruptions.

    Mitigation: Disciplined risk management and portfolio construction.

    Shift in monetary policy outlookQ2 FY26, ongoing

    Treasury yields increased, yield curve flattened, market pivoted from rate cuts to rate hikes by year-end.

    Mitigation: Operating with a positive duration gap; belief that market may have overpriced current environment; expectation of yield curve steepening once war/inflation stabilizes.

    Volatility from new Fed Chairman's hawkish messageQ2 FY26, ongoing

    Not quantified directly, but contributed to monetary policy pivot.

    Mitigation: Expectation that Fed will hold steady given recent inflation readings and wait for task force work.

    Private credit deteriorating and equity valuation stretchedNear term

    Not quantified directly.

    Mitigation: Increased demand for high-quality fixed income assets (Agency MBS).

    What to watch in Q3 FY26

    4

    Mortgage spreads to swap curve

    Second half of the year
    Current145 basis points (Q2 end)
    TargetTighter spreads

    Why it matters

    Management expects constructive dynamics (lower supply, strong demand) to drive tighter spreads, which is critical for profitability.

    Once the current elevated level of geopolitical and monetary policy uncertainty subsides, we believe these constructive dynamics will become more apparent and over time⏳, drive favorable Agency MBS performance.

    Q&A highlights

    6

    What are the current ROEs for new investments, and how does the ability to raise capital at a premium influence investment decisions and capital issuance strategy?

    Marginal ROEs are estimated at 15%-17% at current spread levels (130-150 bps to swap curve). Capital raising is disciplined and opportunistic, with a lighter touch in Q2 due to the stock trading "a little bit heavy" to avoid disrupting stock performance.

    “Returns are good in the market. We do have some volatility that we still have to contend with, which is always a negative. But the underlying fundamentals look good from our perspective.”

    asked by Doug Harter · answered by Peter Federico

    2 min read6 chapters

    Detailed Narrative

    01

    Geopolitical and Macroeconomic Headwinds

    The second quarter was characterized by significant geopolitical uncertainty🌐, particularly concerning the Strait of Hormuz, leading to elevated energy prices and supply chain disruption🌐s. This environment caused Treasury yields to rise, the yield curve to flatten, and market expectations for monetary policy to shift from rate cuts to rate hikes by year-end. These factors contributed to a challenging investment environment for AGNC.

    02

    Agency MBS Outperformance and Technical Factors

    Despite the challenging macro backdrop, Agency MBS demonstrated solid performance, generating a positive excess return to U.S. Treasuries for the fifth consecutive quarter. This was primarily driven by improving technical factors, including a projected drop in net new Agency MBS supply to about $150 billion for the year and strong demand from bond fund inflows, which totaled over $400 billion in the first six months.

    03

    Compelling Value of Agency MBS

    Management highlighted the compelling value of Agency MBS relative to corporate bonds, noting that Agency MBS spreads remain wide by historical standards (145 basis points to a blend of swap hedges), while corporate spreads have tightened to historically low levels despite record issuance ($1.1 trillion expected in 2026) and rising credit concerns. This divergence is expected to drive favorable Agency MBS performance once uncertainty subsides.

    04

    Capital Management and Issuance Strategy

    AGNC continued its disciplined and opportunistic approach to capital management, issuing $167 million of common equity through its ATM program at a significant premium to tangible net book value per share. The company noted a lighter touch on issuance in Q2 due to the stock trading "a little bit heavy," prioritizing shareholder experience and overall stock return, which was 12.3% for the quarter.

    05

    TBA Specialness and Hedge Book Strategy

    TBA specialness, particularly for Jenny pools, has improved and is expected to remain attractive, offering opportunities in the TBA market. The company's hedge book totaled $66 billion, with a slight increase in intermediate and longer-term treasury-based hedges, reducing swap-based hedges to 66% of the portfolio. The duration gap remained stable at 0.7 years, reflecting a preference for positive duration given current interest rates and portfolio convexity.

    06

    GSE Activity and Leverage Considerations

    GSE purchase activity was relatively low in Q2, yet mortgage spreads tightened, indicating market responsiveness. Management believes GSEs have dry powder ($120 billion of purchase activity remaining) and act complementarily to the market, reducing spread volatility. Lower spread volatility, for any reason, would generally allow the market to operate with greater leverage and attract more private capital.

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