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Derivatives
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives DERIVATIVES
Types and Uses of Derivatives Instruments
Interest Rate Derivatives. The Company frequently changes the type of derivative instruments it uses to mitigate the impact of changing interest rates on its repurchase agreement financing costs and the fair value of its investments. Please refer to Note 1 for descriptions of these instruments and how the Company accounts for them.
TBA Transactions. The Company purchases TBA securities as a means of investing in non-specified fixed-rate Agency RMBS and may also periodically sell TBA securities as a means of economically hedging its exposure to Agency RMBS. The Company holds long or short positions in Agency RMBS TBA securities by executing a series of transactions, commonly referred to as “dollar roll” transactions, which effectively delay the settlement of a forward purchase (or sale) of a non-specified Agency RMBS by entering into an offsetting TBA position, net settling the paired-off positions in cash, and simultaneously entering into an identical TBA long (or short) position with a later settlement date. TBA securities purchased (or sold) for a forward settlement date are generally priced at a discount relative to TBA securities settling in the current month. This discount, often referred to as “drop income” represents the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. The Company accounts for Agency RMBS TBAs (whether net long or net short positions, or collectively “TBA dollar roll positions”) as derivative instruments because it cannot assert that it is probable at inception and throughout the term of an individual TBA transaction that its settlement will result in physical delivery of the underlying Agency RMBS, or that the individual TBA transaction will settle in the shortest period possible.
The table below provides detail of the Company’s gain and losses by type of derivative instrument for the
periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
Type of Derivative Instrument2025202420252024
($s in thousands)
U.S. Treasury futures$6,320 $64,210 $(38,027)$204,021 
Interest rate swaps
(72,203)(90)(188,930)(90)
Interest rate swaptions
182 — 993 — 
TBA securities
7,608 (22,985)49,783 (38,160)
(Loss) gain on derivative instruments, net$(58,093)$41,135 $(176,181)$165,771 
The table below provides the carrying amount by type of derivative instrument comprising the Company’s derivative assets and liabilities on its consolidated balance sheets as of the dates indicated:
Type of Derivative InstrumentBalance Sheet LocationPurposeJune 30, 2025December 31, 2024
($s in thousands)
Interest rate swaptions
Derivative assetsEconomic hedging$993 $— 
TBA securitiesDerivative assetsInvesting30,823 133 
Total derivatives assets$31,816 $133 
TBA securitiesDerivative liabilitiesInvesting$31 $22,814 
Total derivatives liabilities$31 $22,814 
The table below presents information regarding the long positions in SOFR-based interest rate swaptions held by the Company as of June 30, 2025, for which the Company had posted $2 million in variation margin. The Company did not hold any interest rate swaptions as of December 31, 2024.
June 30, 2025
Option
Underlying Receiver Swap
Cost Basis
Fair Value
Carrying Value
Notional Amount
Average Fixed Receive Rate
Average Term
($s in thousands)
1-2 year interest rate swaption
$7,975 $8,968 $993 $500,000 3.25 %5 years

Because the daily margin exchanged for the Company’s U.S. Treasury futures and interest rate swaps are considered legal settlement of the derivative as opposed to a pledge of collateral, these instruments have a carrying value of $0 on the Company’s consolidated balance sheets. The Company’s U.S. Treasury futures excluding the recognition of variation margin settlements were in a net liability position of $(69) million as of June 30, 2025 and a net asset position of $1 million as of December 31, 2024, and its interest rate swaps were in a net liability position of $(36) million as of June 30, 2025 and net asset position of $153 million as of December 31, 2024. The amount of cash posted by the Company to cover required initial margin for its U.S. Treasury futures and its interest rate swaps was $315 million as of June 30, 2025 and $219 million as of December 31, 2024, which was recorded within “cash collateral posted to counterparties.” The Company had a margin payable of $38 million as of June 30, 2025, which was recorded within “due to counterparties”, and a margin receivable of $10 million as of December 31, 2024, which was recorded within “due from counterparties.”
The table below presents information regarding the short positions in SOFR-based interest rate swaps the Company held as of the dates indicated:
June 30, 2025December 31, 2024
Interest Rate Swaps - Years to Maturity
Notional Amount
Weighted Average Fixed Pay Rate
Notional Amount
Weighted Average Fixed Pay Rate
($s in thousands)
4-5 years fixed pay swap
$(1,275,000)3.42 %$(1,275,000)3.42 %
5-6 years fixed pay swap
(10,000)4.15 %— — %
6-7 years fixed pay swap
(3,750,000)3.67 %(3,085,000)3.61 %
9-10 years fixed pay swap
(1,875,000)3.93 %(1,025,000)3.83 %
10-15 years fixed pay swap
(250,000)3.73 %— — %
$(7,160,000)3.70 %$(5,385,000)3.61 %
The table below presents information regarding the notional amounts of the short positions in U.S. Treasury futures held by the Company as of the dates indicated:
U.S. Treasury Futures
June 30, 2025December 31, 2024
($s in thousands)
30-year U.S. Treasury futures
$(953,500)$(516,500)
10-year U.S. Treasury futures
(1,521,500)(735,000)
$(2,475,000)$(1,251,500)
The following table summarizes information about the notional amounts of the Company's long positions in TBA securities as of the dates indicated:
TBA securitiesJune 30, 2025December 31, 2024
($s in thousands)
Implied market value (1)
$3,682,818 $2,318,392 
Implied cost basis (2)
3,652,026 2,341,073 
Net carrying value (3)
$30,792 $(22,681)
(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated.
(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.
(3) Net carrying value represents the difference between the implied market value and the implied cost basis of the Company’s TBA securities as of the dates indicated. The total shown is the net amount included on the consolidated balance sheets as derivative assets of $30,823 and derivative liabilities of $31 as of June 30, 2025 and $133 and $22,814, respectively, as of December 31, 2024.
Volume of Activity
The table below summarizes changes in the Company’s derivative instruments for the six months ended June 30, 2025:
Type of Derivative InstrumentBeginning
Notional Amount-Long (Short)		AdditionsSettlements,
Terminations,
or Pair-Offs		Ending
Notional Amount-Long (Short)
($s in thousands)
U.S. Treasury futures$(1,251,500)$(5,566,500)$4,343,000 $(2,475,000)
Interest rate swaps
(5,385,000)(1,775,000)— (7,160,000)
Interest rate swaptions
— 500,000 — 500,000 
TBA securities2,419,000 20,650,000 (19,267,000)3,802,000 

Offsetting
The Company's derivatives are subject to underlying agreements with master netting or similar arrangements, which provide for the right of set off in the event of default or in the event of bankruptcy of either party to the transactions. The Company reports its derivative assets and liabilities subject to these arrangements on a gross basis. Please see Note 4 for information related to the Company’s repurchase agreements, which are also subject to underlying agreements with master netting or similar arrangements. The following tables present information regarding those derivative assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of June 30, 2025 and December 31, 2024:
Offsetting of Assets
($s in thousands)
Gross Amount of Recognized AssetsGross Amount Offset in the Balance SheetNet Amount of Assets Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Received as CollateralCash Received as Collateral
June 30, 2025
Interest rate swaptions
$993 $— $993 $— $— $993 
TBA securities30,823 — 30,823 (8)(21,389)9,426 
Derivative assets$31,816 $— $31,816 $(8)$(21,389)$10,419 
December 31, 2024
TBA securities$133 $— $133 $(133)$— $— 
Derivative assets$133 $— $133 $(133)$— $— 
Offsetting of Liabilities
($s in thousands)
Gross Amount of Recognized LiabilitiesGross Amount Offset in the Balance SheetNet Amount of Liabilities Presented in the Balance Sheet
Gross Amount Not Offset in the Balance Sheet (1)
Net Amount
Financial Instruments Posted as CollateralCash Posted as Collateral
June 30, 2025
TBA securities$31 $— $31 $(8)$— $23 
Derivative liabilities$31 $— $31 $(8)$— $23 
December 31, 2024
TBA securities$22,814 $— $22,814 $(133)$(21,308)$1,373 
Derivative liabilities$22,814 $— $22,814 $(133)$(21,308)$1,373 
(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed as “cash collateral posted to/by counterparties.”