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AGNC Investment Corp. (NASDAQ:) reported a comprehensive loss of $1.02 per share in Q3 2023, largely attributed to significant rate volatility and spread widening. Despite this setback, the company maintains a positive outlook for Agency MBS and keeps its leverage contained at 7.9 times tangible equity.

Key takeaways from the earnings call:

• AGNC reported a comprehensive loss of $1.02 per share in Q3 2023 due to significant rate volatility and spread widening.
• The company's tangible net book value was down about 11% in October.
• Despite the decline, leverage remained contained at 7.9 times tangible equity.
• AGNC issued $432 million of common equity through its at-the-market offering program.
• Net spread and dollar roll income declined to $0.65 per share for the quarter due to higher funding costs.
• AGNC's outlook for Agency MBS is favorable, as spreads have decoupled from treasuries and corporates.
• The non-agency markets saw mixed credit spreads in the quarter, with consumer fundamentals showing signs of weakening.
• AGNC's non-agency portfolio remained unchanged in size, with a focus on repositioning and migrating down the credit stack.

Aaron Pas, during the earnings call, noted that interest rate volatility had a greater impact on interest rate-sensitive products than credit spreads. Despite mixed credit spreads in Q3, some sectors generated slightly positive excess returns. Consumer fundamentals, however, show signs of weakening with rising delinquencies in auto loans, credit cards, and marketplace lending. Despite these challenges, the mortgage side is expected to be less impacted due to significant amounts of homeowners' equity.

The company's investment strategy focuses on long-term outlook, risk management, and maximizing returns through higher coupon securities. Notably, the company does not make decisions based on tax implications or financial statement appearances. Despite the illiquidity challenges in the treasury and agency MBS markets, the company maintained leverage and cash positions throughout the quarter.

Peter Federico, a company representative, reiterated the company's comfort with operating with a preferred mix in the low 20% range. He also emphasized the company's risk management perspective, focusing on the sensitivity of their common stock. He stated that the company aims to achieve a stable cost of funds and offset changes in the market value of their asset portfolio.

Overall, despite the loss reported in Q3 2023, AGNC Investment Corp. maintains a positive outlook and is prepared to navigate the challenges in the mortgage market with a robust investment strategy and risk management approach.

InvestingPro Insights

AGNC Investment Corp. has shown remarkable resilience, as evidenced by InvestingPro's real-time data. With a market capitalization of $4780M and a P/E ratio of 22.46 as of Q3 2023, AGNC remains a significant player in the market. The company's revenue growth has been impressive, increasing by 122.73% in the last twelve months as of Q3 2023, and its gross profit margin stands at a robust 100%.

InvestingPro Tips provide further insights into AGNC's performance. Despite recent market challenges, AGNC's revenue growth has been accelerating, and net income is anticipated to grow this year. The stock is currently in oversold territory according to the RSI, suggesting potential for a rebound. Importantly, AGNC has maintained dividend payments for 16 consecutive years, a testament to its commitment to returning value to shareholders.

In total, InvestingPro offers 11 additional tips for AGNC, providing a comprehensive analysis of the company's current performance and future prospects. For more detailed insights and tips, consider exploring InvestingPro's product offerings.

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