AGNC's book value rose to $8.58 a share as Agency mortgage spreads tightened

AGNC made money in a quarter it describes as hostile. The mortgage real estate investment trust reported $0.52 of net income per common share for the three months to June 30, and tangible net book value per common share of $8.58, up $0.20, or 2.4 percent, from $8.38 at the end of March, according to an 8-K filed with the SEC on July 20. Book value went up.

That is not what a leveraged bond portfolio usually does when yields rise. Net spread and dollar roll income, the measure closest to the portfolio's ongoing earnings, was $0.40 per share, and the $0.36 quarterly dividend plus the book value gain produced a 6.7 percent economic return on tangible common equity. The portfolio ended the quarter at $97.2 billion, of which $86.8 billion was Agency mortgage-backed securities, run at 7.4 times tangible book value at risk.

Peter Federico named the cause. The quarter, its chief executive said, was one in which "escalating rhetoric and hostilities between the United States and Iran largely dictated financial market performance," pushing Treasury yields up and the market's expectations from rate cuts toward rate hikes. Reduced Agency MBS supply against steady demand, he said, tightened spreads and supported the portfolio through the volatility.