AGNC Sees Mortgage Market Recovery Potential Despite Pressure On Fixed Income Securities

AGNC Investment Corp. (NASDAQ:AGNC) shares are trading lower in premarket trading on Tuesday after the company reported mixed third-quarter results on Monday.

Adjusted EPS of 37 cents was in line with estimates, while revenue of $402 million fell short of the $448.4 million analyst consensus.

Book Value Declines As Economic Return Turns Negative

AGNC reported tangible net book value of $7.13 per common share as of Sept. 30, 2026, down 16.9% from $8.58 at the end of the previous quarter.

The company recorded a negative 12.7% economic return on tangible common equity for the quarter.

CFO Bernice Bell said the return reflected 36 cents in dividends per share and a $1.45 decline in tangible book value per share.

Net spread and dollar roll income was 37 cents per common share, compared with 40 cents in the prior quarter.

Agency MBS Portfolio And Prepayment Trends

AGNC’s investment portfolio totaled $94.4 billion as of Sept. 30, including $91.4 billion in Agency mortgage-backed securities (MBS).

The company’s portfolio breakdown also cited $93.8 billion in Agency MBS and to-be-announced (TBA) securities, with 30-year fixed-rate securities accounting for 94% of the portfolio.

The weighted average coupon on fixed-rate Agency MBS and TBA securities increased to 5.13% from 5.04% in June.

AGNC’s projected prepayment rate over the remaining life of its Agency securities fell to 6.7% from 8.6%, while its actual prepayment rate declined to 8.2% from 13%.

Funding Costs Rise As Leverage Increases

The annualized net interest spread narrowed to 1.86% from 2.00%, excluding catch-up premium amortization.

AGNC’s combined weighted average cost of funds, including interest rate swaps, increased to 3.09% from 2.89%. Its quarter-end at-risk leverage ratio rose to 7.9x from 7.4x, while its average leverage ratio stood at 7.6x.

The company’s hedges covered 90% of funding liabilities, up from 73% in June, or 97% excluding option-based hedges, compared with 82% previously.

As of Sept. 30, AGNC’s pay-fixed interest rate swaps totaled $74.6 billion in notional value, while its net short U.S. Treasury position stood at $11.1 billion and receiver swaptions totaled $6.3 billion.

Liquidity And Capital-Raising Activity

Unencumbered cash and Agency MBS totaled $6.3 billion, equal to 57% of tangible equity.

AGNC raised $992 million in net proceeds by issuing 97.6 million common shares through its at-the-market offering program.

Bell said the company benefited from higher trading volumes and issued shares at a significant premium to tangible book value.

AGNC also joined the S&P MidCap 400 Index during the quarter.

Management Sees Potential For Mortgage Market Recovery

AGNC President and CEO Peter Federico said rising interest rates and heightened volatility pressured fixed-income markets in the third quarter, with Agency MBS becoming the weakest-performing sector of the Bloomberg U.S. Aggregate Bond Index.

However, Federico sees potential for a recovery as mortgage spreads approach the upper end of their multiyear range, refinancing risk declines and supply-demand conditions remain balanced.

The company’s quarterly conference call is scheduled today at at 8:30 AM.

AGNC Price Action: AGNC Investment shares were trading lower by 0.85% at $8.36 during premarket trading on Tuesday. The stock is trading at a new 52-week low, according to Benzinga Pro data.

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