DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summarizes Fair Value Information about Derivative Assets Liabilities

The following table summarizes fair value information about the Company’s derivative assets and liabilities at September 30, 2024 and December 31, 2023:

Derivatives Instruments	September 30, 2024		December 31, 2023
Assets	(dollars in thousands)
Interest rate swaps	$	3,094	$	26,344
Interest rate swaptions	13,068		105,883
TBA derivatives	2,869		20,689
Futures contracts	23,256		—
Purchase commitments	16,784		9,641
Total derivative assets	$	59,071	$	162,557
Liabilities
Interest rate swaps	$	59,297	$	83,051
TBA derivatives	8,601		39,070
Futures contracts	32,117		179,835
Purchase commitments	2,613		339
Total derivative liabilities	$	102,628	$	302,295

Summary of Certain Characteristics of Derivatives

The following tables summarize certain characteristics of the Company’s interest rate swaps at September 30, 2024 and December 31, 2023:

September 30, 2024
Maturity	Current Notional (1)		Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	19,961,229	3.33	%	4.95	%	1.05
3 - 6 years	13,510,021		3.10	%	4.94	%	4.62
6 - 10 years	20,114,937		2.77	%	4.95	%	7.97
Greater than 10 years	1,559,384		3.44	%	4.84	%	23.50
Total / Weighted average	$	55,145,571	3.05	%	4.94	%	5.08
December 31, 2023
Maturity	Current Notional (1)		Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	21,397,358	3.17	%	5.26	%	1.23
3 - 6 years	12,461,799		3.09	%	5.37	%	4.75
6 - 10 years	22,949,150		2.85	%	5.34	%	8.02
Greater than 10 years	2,021,247		3.53	%	5.27	%	22.71
Total / Weighted average	$	58,829,554	3.04	%	5.31	%	5.36
(1) As of September 30, 2024, 7% and 93% of the Company’s interest rate swaps were linked to the Federal funds rate and the SOFR, respectively. As of December 31, 2023, 6% and 94% of the Company’s interest rate swaps were linked to the Federal funds rate and the SOFR, respectively. (2) The weighted average years to maturity of payer interest rate swaps is offset by the weighted average years to maturity of receiver interest rate swaps. As such, the net weighted average years to maturity for each maturity bucket may fall outside of the range listed.

The following tables summarize certain characteristics of the Company’s swaptions at September 30, 2024 and December 31, 2023:

September 30, 2024
	Current Underlying Notional	Weighted Average Underlying Fixed Rate	Weighted Average Underlying Floating Rate	Weighted Average Underlying Years to Maturity	Weighted Average Months to Expiration
(dollars in thousands)
Long pay	$250,000	2.40%	SOFR	5.03	0.23
December 31, 2023
	Current Underlying Notional	Weighted Average Underlying Fixed Rate	Weighted Average Underlying Floating Rate	Weighted Average Underlying Years to Maturity	Weighted Average Months to Expiration
(dollars in thousands)
Long pay	$1,250,000	2.21%	SOFR	7.69	8.21
Long receive	$500,000	1.65%	SOFR	10.30	3.53

The following tables summarize certain characteristics of the Company’s TBA derivatives at September 30, 2024 and December 31, 2023:

September 30, 2024
Purchase and Sale Contracts for Derivative TBAs	Notional		Implied Cost Basis		Implied Market Value		Net Carrying Value
(dollars in thousands)
Purchase contracts	$	3,319,000	$	3,333,873	$	3,328,141	$	(5,732)
Net TBA derivatives	$	3,319,000	$	3,333,873	$	3,328,141	$	(5,732)
December 31, 2023
Purchase and Sale Contracts for Derivative TBAs	Notional		Implied Cost Basis		Implied Market Value		Net Carrying Value
(dollars in thousands)
Purchase contracts	$	988,000	$	920,626	$	915,790	$	(4,836)
Sale contracts	(1,491,000)		(1,475,847)		(1,489,392)		(13,545)
Net TBA derivatives	$	(503,000)	$	(555,221)	$	(573,602)	$	(18,381)

The following tables summarize certain characteristics of the Company’s futures derivatives at September 30, 2024 and December 31, 2023: 

September 30, 2024
	Notional - Long Positions		Notional - Short Positions		Weighted Average Years to Maturity
	(dollars in thousands)
U.S. Treasury futures - 2 year	$	—	$	(16,793,200)	1.94
U.S. Treasury futures - 5 year	3,346,000		—		4.39
U.S. Treasury futures - 10 year and greater	621,300		(2,285,500)		12.41
Total	$	3,967,300	$	(19,078,700)	3.62
December 31, 2023
	Notional - Long Positions		Notional - Short Positions		Weighted Average Years to Maturity
	(dollars in thousands)
U.S. Treasury futures - 2 year	$	—	$	(5,001,400)	1.97
U.S. Treasury futures - 10 year and greater	—		(1,733,600)		14.26
Total	$	—	$	(6,735,000)	5.13

Offsetting of Derivative Assets and Liabilities

The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset in the Company’s Consolidated Statements of Financial Condition at September 30, 2024 and December 31, 2023, respectively.

September 30, 2024
			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments		Cash Collateral		Net Amounts
Assets	(dollars in thousands)
Interest rate swaps, at fair value	$	3,094	$	—	$	—	$	3,094
Interest rate swaptions, at fair value	13,068		—		(11,100)		1,968
TBA derivatives, at fair value	2,869		(2,660)		—		209
Futures contracts, at fair value	23,256		(20,305)		—		2,951
Purchase commitments	16,784		—		—		16,784
Liabilities
Interest rate swaps, at fair value	$	59,297	$	(48,713)	$	—	$	10,584
TBA derivatives, at fair value	8,601		(6,972)		—		1,629
Futures contracts, at fair value	32,117		(20,305)		(11,812)		—
Purchase commitments	2,613		—		—		2,613
December 31, 2023
			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments		Cash Collateral		Net Amounts
Assets	(dollars in thousands)
Interest rate swaps, at fair value	$	26,344	$	(21,505)	$	—	$	4,839
Interest rate swaptions, at fair value	105,883		(45,930)		(57,320)		2,633
TBA derivatives, at fair value	20,689		(13,282)		—		7,407
Purchase commitments	9,641		—		—		9,641
Liabilities
Interest rate swaps, at fair value	$	83,051	$	(72,844)	$	—	$	10,207
TBA derivatives, at fair value	39,070		(34,525)		—		4,545
Futures contracts, at fair value	179,835		—		(179,835)		—
Purchase commitments	339		—		—		339

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

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

Location on Consolidated Statements of Comprehensive Income (Loss)
	Net Interest Component of Interest Rate Swaps (1)		Realized Gains (Losses) on Termination of Interest Rate Swaps (1)		Unrealized Gains (Losses) on Interest Rate Swaps (1)
For the three months ended	(dollars in thousands)
September 30, 2024	$	317,483	$	(94,016)	$	(1,582,495)
September 30, 2023	$	394,677	$	16,416	$	1,475,547
For the nine months ended
September 30, 2024	$	946,004	$	(96,532)	$	(584,109)
September 30, 2023	$	1,205,676	$	(81,255)	$	1,360,977
(1) Included in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

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

Three Months Ended September 30, 2024
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives	$	40,561	$	(18,181)	$	22,380
Net interest rate swaptions	(21,180)		(113,792)		(134,972)
Futures	(362,660)		71,146		(291,514)
Purchase commitments	—		9,124		9,124
Total					$	(394,982)

Three Months Ended September 30, 2023
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives	$	(81,964)	$	(41,777)	$	(123,741)
Net interest rate swaptions	(27,860)		(51,041)		(78,901)
Futures (1)	309,397		131,578		440,975
Purchase commitments	—		2,457		2,457
Total					$	240,790
(1) For the three months ended September 30, 2023, includes $13.2 million of unrealized gain and ($18.9) million of realized loss related to SOFR futures options.

Nine Months Ended September 30, 2024
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives	$	15,694	$	12,649	$	28,343
Net interest rate swaptions	(33,511)		(59,304)		(92,815)
Futures (1)	(323,113)		170,973		(152,140)
Purchase commitments	—		4,870		4,870
Total					$	(211,742)
(1) For the nine months ended September 30, 2024, includes ($6.8) million of realized loss related to SOFR futures options.

Nine Months Ended September 30, 2023
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives	$	(136,452)	$	12,710	$	(123,742)
Net interest rate swaptions	(25,538)		(43,627)		(69,165)
Futures (1)	185,716		229,940		415,656
Purchase commitments	—		(122)		(122)
Credit derivatives	(19,282)		13,260		(6,022)
Total					$	216,605
(1) For the nine months ended September 30, 2023, includes ($5.6) million of unrealized loss and ($18.9) million of realized loss related to SOFR futures options.