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Introduction & Market Context
AGNC Investment Corp (NASDAQ:AGNC), a leading agency residential mortgage REIT, released its Q2 2025 stockholder presentation on July 22, 2025, revealing a comprehensive loss despite maintaining its substantial dividend yield. The company navigated a quarter marked by mixed interest rate movements, with 30-year Treasury yields rising 21 basis points while 2-year Treasury yields declined 17 basis points.
The mortgage REIT, which closed at $9.25 on July 21 and traded up 0.54% in after-hours trading, continues to offer an attractive dividend yield of 15.7% even as it faced headwinds in book value preservation. This follows a stronger Q1 2025 performance when the company beat EPS expectations with $0.44 per share.
Quarterly Performance Highlights
AGNC reported a comprehensive loss per share of $(0.13) for Q2 2025, a significant decline from the positive comprehensive income of $0.12 per share in the previous quarter. The company’s tangible net book value per share decreased to $7.81, representing a $(0.44) reduction from the previous quarter.
Despite these challenges, AGNC maintained its quarterly dividend at $0.36 per share, consistent with previous quarters. The company reported net spread and dollar roll income of $0.38 per share, which covers the dividend but shows pressure on earnings capacity.
As shown in the following comprehensive performance summary:
The company’s economic return for the quarter was negative at (1.0)%, a substantial deterioration from the 2.4% positive return reported in Q1 2025. This metric, which combines dividend income and book value changes, highlights the challenges AGNC faced during the quarter.
Portfolio and Investment Strategy
AGNC expanded its investment portfolio to $82.3 billion as of June 30, 2025, an increase from $78.9 billion at the end of the previous quarter. The company maintained its leverage at 7.6x, slightly higher than the 7.5x reported at the end of Q1.
The portfolio’s average asset yield remained stable at 4.87%, identical to the previous quarter. However, the company’s average cost of funds increased from 2.75% in Q1 to 2.86% in Q2, compressing net interest spread.
The following chart illustrates key portfolio metrics and their quarter-over-quarter changes:
AGNC’s investment portfolio consists primarily of fixed-rate agency mortgage-backed securities, with a weighted average coupon of 5.13%. The company focuses on high-quality specified pools, which represented 41% of the portfolio, while other pools with favorable prepayment attributes accounted for 40%.
The detailed portfolio composition shows a concentration in higher coupon securities, with 5.0%, 5.5%, and 6.0% coupons representing the largest portions of the 30-year portfolio:
Risk Management and Hedging
In response to interest rate volatility, AGNC adjusted its hedging strategy during the quarter. The company’s hedge ratio decreased slightly from 91% to 89%, while its duration gap narrowed from 0.4 years to 0.2 years, indicating a more closely matched asset-liability duration profile.
AGNC’s hedging portfolio totaled $65.7 billion as of June 30, 2025, consisting of $45.1 billion in net pay-fixed swaps and $20.0 billion in net short Treasury positions. This comprehensive approach to interest rate risk management is detailed in the following summary:
The company’s financing strategy showed a slight improvement in repo costs, which decreased from 4.45% in Q1 to 4.44% in Q2. As of quarter-end, AGNC had $34.7 billion of repo funded through its captive broker-dealer subsidiary, representing a significant portion of its financing activities.
The financing summary provides further details on the company’s funding approach:
Financial Position and Results
AGNC’s balance sheet showed total assets of $102.0 billion as of June 30, 2025, with total liabilities of $91.7 billion and stockholders’ equity of $10.3 billion. The company reported a net loss of $(140) million for Q2 2025, translating to $(0.17) per common share.
The detailed balance sheet comparison across recent quarters illustrates the company’s financial position:
The reconciliation of GAAP comprehensive income to net spread and dollar roll income shows the adjustments made to arrive at the company’s preferred operational performance metric:
Market Conditions and Outlook
The market environment during Q2 2025 presented mixed signals for mortgage REITs. While the MOVE Index (measuring interest rate volatility) decreased by 11 points during the quarter, agency MBS spreads widened slightly, creating challenges for book value preservation.
Current coupon agency MBS yields decreased marginally, with 30-year current coupon yield declining 3 basis points and 15-year current coupon yield falling 9 basis points during the quarter.
The following market highlights illustrate the interest rate and spread environment AGNC navigated during Q2:
Looking at historical performance, AGNC has maintained consistent dividend payments of $0.36 per share despite fluctuations in book value and economic returns. The company’s tangible net book value per share has declined from $9.39 in Q2 2023 to the current $7.81, reflecting the challenging interest rate environment over the past two years.
While AGNC did not provide explicit forward guidance in the presentation, the company’s consistent dividend policy and strategic portfolio positioning suggest a focus on long-term income generation despite near-term book value volatility. This approach aligns with CEO Peter Federico’s comments from the previous quarter, where he expressed confidence in the long-term prospects for Agency MBS as an asset class despite market volatility.
The company’s substantial liquidity position, with $6.4 billion in unencumbered cash and Agency MBS (representing 65% of tangible equity), provides flexibility to navigate market challenges and potentially capitalize on investment opportunities as they arise.
Full presentation:
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