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Derivative Instruments and Hedging Activities (Tables)
 12 Months Ended
Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
The following tables present the gross fair value and notional amounts of the Company’s derivative financial instruments treated as trading derivatives as of December 31, 2021 and December 31, 2020:
December 31, 2021
Derivative AssetsDerivative Liabilities
(in thousands)Fair ValueNotionalFair ValueNotional
Inverse interest-only securities
$41,367 $247,101 $— $— 
Interest rate swap agreements
— 20,387,300 — — 
Swaptions, net— — (51,743)(1,761,000)
TBAs3,405 3,523,000 (1,915)593,000 
U.S. Treasury and Eurodollar futures, net35,362 (5,829,600)— — 
Total$80,134 $18,327,801 $(53,658)$(1,168,000)
December 31, 2020
Derivative AssetsDerivative Liabilities
(in thousands)Fair ValueNotionalFair ValueNotional
Inverse interest-only securities
$62,200 $318,162 $— $— 
Interest rate swap agreements
— — — 12,646,341 
Swaptions, net— — (596)3,750,000 
TBAs30,062 7,700,000 (10,462)(2,503,000)
U.S. Treasury futures, net3,675 2,021,100 — — 
Total$95,937 $10,039,262 $(11,058)$13,893,341 
Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance
The following table summarizes the location and amount of gains and losses on derivative instruments reported in the consolidated statements of comprehensive (loss) income:
Derivative InstrumentsLocation of Gain (Loss) Recognized in IncomeAmount of Gain (Loss) Recognized in Income
Year Ended
(in thousands)December 31,
202120202019
Interest rate risk management:
TBAs
(Loss) gain on other derivative instruments
$(193,479)$60,798 $214,414 
Short U.S. Treasuries
(Loss) gain on other derivative instruments
— — (6,801)
U.S. Treasury and Eurodollar futures
(Loss) gain on other derivative instruments
(49,213)18,143 44,474 
Put and call options for TBAs
(Loss) gain on other derivative instruments
(5,683)— (7,666)
Interest rate swaps - Payers
Gain (loss) on interest rate swap, cap and swaption agreements
92,317 (1,128,788)(637,307)
Interest rate swaps - Receivers
Gain (loss) on interest rate swap, cap and swaption agreements
(66,828)879,289 461,801 
Swaptions
Gain (loss) on interest rate swap, cap and swaption agreements
16,602 (61,307)74,901 
Interest rate caps
Gain (loss) on interest rate swap, cap and swaption agreements
— — (7,684)
Markit IOS total return swaps
(Loss) gain on other derivative instruments
— (2,430)(1,213)
Non-risk management:
Inverse interest-only securities
(Loss) gain on other derivative instruments
(2,908)13,512 16,790 
Total$(209,192)$(220,783)$151,709 
Schedule of Notional Amounts of Outstanding Derivative Positions
The following tables present information with respect to the volume of activity in the Company’s derivative instruments during the years ended December 31, 2021 and 2020:
Year Ended December 31, 2021
(in thousands)Beginning of Period Notional AmountAdditionsSettlement, Termination, Expiration or ExerciseEnd of Period Notional AmountAverage Notional Amount
Realized Gain (Loss),
net (1)
Inverse interest-only securities$318,162 $— $(71,061)$247,101 $282,380 $(398)
Interest rate swap agreements12,646,341 10,107,476 (2,366,517)20,387,300 15,870,590 (5,778)
Swaptions, net3,750,000 (2,871,000)(2,640,000)(1,761,000)(428,586)8,147 
TBAs, net5,197,000 90,927,000 (92,008,000)4,116,000 6,538,666 (175,368)
Put and call options for TBAs, net— 1,500,000 (1,500,000)— 267,123 (5,683)
U.S. Treasury and Eurodollar futures
2,021,100 7,447,600 (15,298,300)(5,829,600)(2,197,734)(80,867)
Total$23,932,603 $107,111,076 $(113,883,878)$17,159,801 $20,332,439 $(259,947)
Year Ended December 31, 2020
(in thousands)Beginning of Period Notional AmountAdditionsSettlement, Termination, Expiration or ExerciseEnd of Period Notional AmountAverage Notional Amount
Realized Gain (Loss),
net (1)
Inverse interest-only securities$397,137 $— $(78,975)$318,162 $360,000 $(116)
Interest rate swap agreements39,702,470 56,867,740 (83,923,869)12,646,341 27,137,669 (334,458)
Swaptions, net1,257,000 6,767,000 (4,274,000)3,750,000 2,188,661 (53,290)
TBAs, net7,427,000 60,103,000 (62,333,000)5,197,000 4,540,759 42,499 
U.S. Treasury and Eurodollar futures
(380,000)13,385,800 (10,984,700)2,021,100 791,420 14,996 
Markit IOS total return swaps41,890 — (41,890)— 10,141 (2,077)
Total$48,445,497 $137,123,540 $(161,636,434)$23,932,603 $35,028,650 $(332,446)
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(1)Excludes net interest paid or received in full settlement of the net interest spread liability.
Schedule of TBA Positions The following tables present the notional amount, cost basis, market value and carrying value (which approximates fair value) of the Company’s TBA positions as of December 31, 2021 and December 31, 2020:
December 31, 2021
Net Carrying Value (4)
(in thousands)
Notional Amount (1)
Cost Basis (2)
Market Value (3)
Derivative AssetsDerivative Liabilities
Purchase contracts$4,116,000 $4,238,881 $4,240,371 $3,405 $(1,915)
Sale contracts— — — — — 
TBAs, net$4,116,000 $4,238,881 $4,240,371 $3,405 $(1,915)
December 31, 2020
Net Carrying Value (4)
(in thousands)
Notional Amount (1)
Cost Basis (2)
Market Value (3)
Derivative AssetsDerivative Liabilities
Purchase contracts$7,700,000 $8,102,344 $8,132,406 $30,062 $— 
Sale contracts(2,503,000)(2,640,465)(2,650,927)— (10,462)
TBAs, net$5,197,000 $5,461,879 $5,481,479 $30,062 $(10,462)
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(1)Notional amount represents the face amount of the underlying Agency RMBS.
(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.
(3)Market value represents the current market value of the TBA (or of the underlying Agency RMBS) as of period-end.
(4)Net carrying value represents the difference between the market value of the TBA as of period-end and its cost basis, and is reported in derivative assets / (liabilities), at fair value, in the consolidated balance sheets.
Schedule of U.S. Treasury and Eurodollar Futures The following table summarizes certain characteristics of the Company’s U.S. Treasury and Eurodollar futures as of December 31, 2021 and December 31, 2020:
(dollars in thousands)December 31, 2021December 31, 2020
Type & MaturityNotional AmountCarrying ValueWeighted Average Days to ExpirationNotional AmountCarrying ValueWeighted Average Days to Expiration
U.S. Treasury futures - 10 year$687,900 $1,809 90$2,021,100 $3,675 90
Eurodollar futures - 3 month
≤ 1 year(3,582,000)15,121 213— — 0
> 1 and ≤ 2 years(2,269,500)14,952 560— — 0
> 2 and ≤ 3 years(666,000)3,480 854— — 0
Total futures$(5,829,600)$35,362 370$2,021,100 $3,675 90
Schedule of Interest Rate Swap Payers As of December 31, 2021 and December 31, 2020, the Company held the following interest rate swaps that were utilized as economic hedges of interest rate exposure (or duration) whereby the Company receives interest at a floating interest rate (LIBOR, OIS or SOFR):
(notional in thousands)
December 31, 2021
Swaps MaturitiesNotional AmountWeighted Average Fixed Pay RateWeighted Average Receive RateWeighted Average Maturity (Years)
2022$7,415,818 0.420 %0.070 %0.66
20232,582,084 0.113 %0.068 %1.51
2024— — %— %0.00
2025377,610 1.030 %0.050 %3.96
2026 and Thereafter2,782,057 0.652 %0.063 %6.56
Total$13,157,569 0.213 %0.067 %2.17
(notional in thousands)
December 31, 2020
Swaps MaturitiesNotional AmountWeighted Average Fixed Pay RateWeighted Average Receive RateWeighted Average Maturity (Years)
2021$— — %— %0.00
20227,415,818 0.042 %0.090 %1.66
20232,281,500 0.023 %0.090 %2.48
2024— — %— %0.00
2025 and Thereafter1,497,500 0.257 %0.090 %6.49
Total$11,194,818 0.067 %0.090 %2.47
Schedule of Interest Rate Swap Receivers
Additionally, as of December 31, 2021 and December 31, 2020, the Company held the following interest rate swaps in order to mitigate mortgage interest rate exposure (or duration) risk whereby the Company pays interest at a floating interest rate (LIBOR OIS or SOFR):
(notional in thousands)
December 31, 2021
Swaps MaturitiesNotional AmountsWeighted Average Pay RateWeighted Average Fixed Receive RateWeighted Average Maturity (Years)
2022$2,221,658 0.070 %0.118 %1.19
2023— — %— %0.00
2024— — %— %0.00
2025— — %— %0.00
2026 and Thereafter5,008,073 0.058 %1.049 %10.00
Total$7,229,731 0.062 %0.763 %7.29
(notional in thousands)
December 31, 2020
Swaps MaturitiesNotional AmountsWeighted Average Pay RateWeighted Average Fixed Receive RateWeighted Average Maturity (Years)
2021$— — %— %0.00
2022— — %— %0.00
2023— — %— %0.00
2024— — %— %0.00
2025 and Thereafter1,451,523 0.090 %0.468 %9.49
Total$1,451,523 0.090 %0.468 %9.49
Schedule of Interest Rate Swaptions As of December 31, 2021 and December 31, 2020, the Company had the following outstanding interest rate swaptions:
December 31, 2021
(notional and dollars in thousands)OptionUnderlying Swap
SwaptionExpirationCost BasisFair ValueAverage Months to ExpirationNotional AmountAverage Pay RateAverage Receive RateAverage Term (Years)
Purchase contracts:
Payer< 6 Months$11,314 $3,539 5.33 $886,000 2.26 %3M LIBOR10.0
Sale contracts:
Payer≥ 6 Months$(26,329)$(23,958)17.79 $(780,000)1.72 %3M LIBOR10.0
Receiver< 6 Months$(10,640)$(6,856)5.11 $(1,087,000)3M LIBOR1.26 %10.0
Receiver≥ 6 Months$(26,329)$(24,468)18.91 $(780,000)3M LIBOR1.72 %10.0
December 31, 2020
(notional and dollars in thousands)OptionUnderlying Swap
SwaptionExpirationCostFair ValueAverage Months to ExpirationNotional AmountAverage Pay RateAverage Receive RateAverage Term (Years)
Purchase contracts:
Payer< 6 Months$7,210 $2,448 4.23 $2,800,000 1.32 %3M LIBOR10.0
Receiver< 6 Months$3,010 $— 0.97 $2,000,000 3M LIBOR0.23 %10.0
Sale contracts:
Receiver< 6 Months$(2,600)$(3,044)5.13 $(1,050,000)3M LIBOR0.55 %10.0