DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summarizes Fair Value Information about Derivative Assets Liabilities

The table below summarizes fair value information about our derivative assets and liabilities at March 31, 2018 and December 31, 2017:

Derivatives Instruments	Balance Sheet Location	March 31, 2018		December 31, 2017
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	69,109	$	30,272
Interest rate swaptions	Other derivatives, at fair value	113,701		36,150
TBA derivatives	Other derivatives, at fair value	47,064		29,067
Futures contracts	Other derivatives, at fair value	—		218,361
Purchase commitments	Other derivatives, at fair value	428		35
		$	230,302	$	313,885
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	427,838	$	569,129
TBA derivatives	Other derivatives, at fair value	21,855		21,776
Futures contracts	Other derivatives, at fair value	122,436		12,285
Purchase commitments	Other derivatives, at fair value	262		157
Credit derivatives (1)	Other derivatives, at fair value	8,550		4,507
		$	580,941	$	607,854

(1) The maximum potential amount of future payments is the notional amount of $285.0 million and $125.0 million at March 31, 2018 and December 31, 2017, respectively.

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s TBA derivatives at March 31, 2018 and December 31, 2017:

March 31, 2018
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	8,954,000		$	9,107,423		$	9,132,632		$	25,209
December 31, 2017
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	15,828,000		$	16,381,826		$	16,390,251		$	8,425
Sale contracts	(250,000		)	(254,804		)	(255,938		)	(1,134		)
Net TBA derivatives	$	15,578,000		$	16,127,022		$	16,134,313		$	7,291

The following table summarizes certain characteristics of the Company’s futures derivatives at March 31, 2018 and December 31, 2017:

	March 31, 2018
	Notional - Long Positions		Notional - Short Positions			Weighted Average Years to Maturity
	(dollars in thousands)
U.S. Treasury futures - 5 year	$	—	$	(4,597,400	)	4.42
U.S. Treasury futures - 10 year and greater	—		(9,154,500		)	6.99
Total	$	—	$	(13,751,900	)	6.13
	December 31, 2017
	Notional - Long Positions		Notional - Short Positions			Weighted Average Years to Maturity
	(dollars in thousands)
2-year swap equivalent Eurodollar contracts	$	—	$	(17,161,000	)	2.00
U.S. Treasury futures - 5 year	—		(4,217,400		)	4.41
U.S. Treasury futures - 10 year and greater	—		(4,914,500		)	7.01
Total	$	—	$	(26,292,900	)	3.32

The following table presents swaptions outstanding at March 31, 2018 and December 31, 2017.

March 31, 2018	Current Underlying Notional		Weighted Average Underlying Pay Rate		Weighted Average Underlying Receive Rate	Weighted Average Underlying Years to Maturity	Weighted Average Months to Expiration
(dollars in thousands)
Long	$	6,000,000	2.72	%	3M LIBOR	10.33	3.88
December 31, 2017	Current Underlying Notional		Weighted Average Underlying Pay Rate		Weighted Average Underlying Receive Rate	Weighted Average Underlying Years to Maturity	Weighted Average Months to Expiration
(dollars in thousands)
Long	$	6,000,000	2.62	%	3M LIBOR	9.97	4.49

The following table summarizes certain characteristics of the Company’s interest rate swaps at March 31, 2018 and December 31, 2017:

March 31, 2018
Maturity	Current Notional (1)		Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Years to Maturity
(dollars in thousands)
0 - 3 years	$	38,344,000	1.64	%	2.19	%	1.77
3 - 6 years	13,254,550		2.17	%	2.12	%	4.67
6 - 10 years	10,547,000		2.32	%	2.02	%	8.11
Greater than 10 years	3,826,400		3.65	%	1.94	%	18.22
Total / Weighted Average	$	65,971,950	2.00	%	2.13	%	4.52
December 31, 2017
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)		Weighted Average Receive Rate (2)		Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	6,532,000	1.56	%	1.62	%	2.08
3 - 6 years	14,791,800		2.12	%	1.57	%	4.51
6 - 10 years	10,179,000		2.35	%	1.58	%	8.04
Greater than 10 years	3,826,400		3.65	%	1.51	%	18.47
Total / Weighted Average	$	35,329,200	2.22	%	1.58	%	6.72

(1) There were no forward starting swaps at March 31, 2018. Notional amount includes $8.1 billion of forward starting pay fixed swaps at December 31, 2017.

(2) Excludes forward starting swaps.

(3) Weighted average fixed rate on forward starting pay fixed swaps was 1.86% at December 31, 2017.

Offsetting of Derivative Assets and Liabilities

The following tables present information about derivative assets and liabilities that are subject to such provisions and can potentially be offset on our Consolidated Statements of Financial Condition at March 31, 2018 and December 31, 2017, respectively.

	March 31, 2018
			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	69,109	$	(40,470	)	$	—		$	28,639
Interest rate swaptions, at fair value	113,701		—			—			113,701
TBA derivatives, at fair value	47,064		(21,855		)	—			25,209
Purchase commitments	428		—			—			428
Liabilities:
Interest rate swaps, at fair value	$	427,838	$	(40,470	)	$	(6,856	)	$	380,512
TBA derivatives, at fair value	21,855		(21,855		)	—			—
Futures contracts, at fair value	122,436		—			(122,436		)	—
Purchase commitments	262		—			—			262
Credit derivatives	8,550		—			(6,460		)	2,090
	December 31, 2017
			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	30,272	$	(27,379	)	$	—		$	2,893
Interest rate swaptions, at fair value	36,150		—			—			36,150
TBA derivatives, at fair value	29,067		(12,551		)	—			16,516
Futures contracts, at fair value	218,361		(12,285		)	—			206,076
Purchase commitments	35		—			—			35
Liabilities:
Interest rate swaps, at fair value	$	569,129	$	(27,379	)	$	—		$	541,750
TBA derivatives, at fair value	21,776		(12,551		)	—			9,225
Futures contracts, at fair value	12,285		(12,285		)	—			—
Purchase commitments	157		—			—			157
Credit derivatives	4,507		—			(3,520		)	987

Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss

The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:

	Location on Consolidated Statements of Comprehensive Income (Loss)
	Realized Gains (Losses) on Interest Rate Swaps (1)			Realized Gains (Losses) on Termination or Maturity of Interest Rate Swaps		Unrealized Gains (Losses) on Interest Rate Swaps
	(dollars in thousands)
Three Months Ended:
March 31, 2018	$	(48,160	)	$	834	$	977,285
March 31, 2017	$	(104,156	)	$	—	$	149,184

(1) Interest expense related to interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss).

Effect of Other Derivative Contracts on the Consolidated Statements of Operations and Comprehensive Income (Loss)

The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Three Months Ended March 31, 2018
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives	$	(277,901	)	$	17,917		$	(259,984	)
Net interest rate swaptions	(21,434		)	67,221			45,787
Futures	495,013			(328,512		)	166,501
Purchase commitments	—			366			366
Credit derivatives	1,513			(1,328		)	185
Total							$	(47,145	)
Three Months Ended March 31, 2017
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives	$	(60,314	)	$	83,080		$	22,766
Futures	973			(23,704		)	(22,731		)
Purchase commitments	—			265			265
Total							$	300