Dynex Capital Inc (DX) 2019 Q1 法說會逐字稿

Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dynex Capital, Inc. First Quarter 2019 Earnings Results and Conference Call. (Operator Instructions) Alison Griffin, Vice President of Investor Relations, you may begin your conference.

Thank you. Good morning, everyone, and thank you for joining us today. With me on the call, I have Byron Boston, President and Chief Executive Officer; Smriti Popenoe, Chief Investment Officer; and Steve Benedetti, Chief Financial Officer and Chief Operating Officer.

The press release associated with today's call was issued and filed with the SEC this morning, May 1, 2019. You may view the press release on the homepage of the Dynex website at dynexcapital.com as well as on the SEC's website at sec.gov.

Before we begin, we wish to remind you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, forecast, anticipate, estimate, project, plan and similar expressions identify forward-looking statements that are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.

The company's actual results and timing of certain events could differ considerably from those projected and/or contemplated by those forward-looking statements as a result of unforeseen external factors or risks. For additional information on these factors or risks, please refer to the annual report on Form 10-K for the period ending December 31, 2018, as filed with the SEC. The document may be found on the Dynex website under Investor Center as well as on the SEC's website.

This call is being broadcast live over the Internet with a streaming slide presentation, which can be found through a webcast link on the homepage of the website. The slide presentation may also be referenced under Quarterly Reports on the Investor Center page.

I now have the pleasure of turning the call over to CEO, Byron Boston.

Thank you, Alison. Good morning, and thank you all so much for joining our call. Let me start the call with a brief mention of Dave Walrod who passed away last month. Dave was a sell-side analyst with Jones Trading and prior to that, with Ladenburg Thalmann and JPMorgan. Dave was a friend of the company, and his good nature, insights and friendship will be missed by all of us here at Dynex.

As I typically do, I will refer to the slide deck on our website at www.dynexcapital.com throughout this presentation. I encourage you to review the deck in its entirety. The presentation includes information intended to help our investors understand how we're thinking about the global macroenvironment, the return environment, our current portfolio construction, our earnings trajectory and the risk that we have chosen to take to generate income for our shareholders.

Now let's turn to Slide 3 and look at our results. Our performance during the first quarter was solid as markets rallied and volatility ebbed in sharp contrast to the fourth quarter. The low volatility environment allowed us to modestly increase leverage and regain a portion of our book value per common share lost in the volatility at the end of 2018.

As noted on Slide 3, for the quarter, we posted a total economic return of 6.7%, comprehensive income of $0.46 per common share and core net operating income of $0.18. Book value increased 3.7% to $6.24 per common share led by tighter Agency CMBS spreads and to a lesser extent Agency RMBS and CMBS IO spreads.

Adjusted net interest spread declined 5 basis points during the quarter to 1.19% from lower drop income on TBAs and the spread between 3-month LIBOR and repo rates.

Let's see, overall our investment portfolio inclusive of TBAs grew to $5.5 billion from $4.7 billion, reflecting the deployment of the capital raise during the quarter. And we added more Agency CMBS securities during the quarter and the mix between resi securities and commercial securities was approximately 60-40 or close to 60-37% at the end of the quarter.

Now let's turn to Slide 4 and 5. And let me remind you that we take a top-down approach to the markets by taking a very disciplined approach to forming a global macro view of the economy and markets and then working our way down to our individual bond selection for our portfolio. And as you can see here on Slide 4, a key tenet of our global view is best expressed, which we have lifted from the World Economic Forum's Global Risk Report for 2019. The picture looks very complicated, but it is very reflective of the world in which we currently find ourselves. My favorite line in this report simply states that global risks are intensifying as the world is facing a growing number of complex and interconnected challenges.

Now look at Slide 5. In a world -- in this world of growing uncertainty and intensifying global risk, we, at Dynex, believe that generating cash income from United States real estate-related assets and the United States housing finance system is the most attractive investment in global capital markets today. In our opinion, the optimal portfolio for the environment is a diversified pool of highly liquid mortgage investments with minimal credit risk.

Given our view of the environment, we believe long-term investors should seek and favor experienced management teams, and Dynex brings significant experience and expertise in managing securitized real estate assets through multiple economic cycles.

And then finally, investors should focus on the long term as we always have here at Dynex and the long-term total return of mortgage REITs.

Dynex Capital and the mortgage REIT industry as a whole offer good long-term returns both in our preferred stock and common equity, high-single digit to low-teen returns and otherwise low global return environment with tons of negative yielding debt, and Central Bank's holding up prices of other risky assets.

Now look at our key take away slides on Slide 6 and 7. The current inverted structure of the interest rate curve is unusual and has historically lasted 6 to 9 months. In the near term, our returns will be impacted by a couple of factors: 3 month LIBOR, 1 month repo spreads and prepayments. These factors may be a headwind to earnings.

Now look at Slide 7. Our long-term returns that we have talked about multiple times in the past continues to support our business model. Demographics support a growing demand for cash yield in addition to the fact that we just mentioned the amount of low yielding assets globally. There's a need for private capital in the US housing finance system as the Federal Reserve attempts to reduce its investments in Agency RMBS and GSE reform may create new investment opportunities.

We have stated many times that given our view of this environment, we believe long-term investors should seek the higher yields offered by the mortgage REIT environment. And we continue to think from a long-term perspective at Dynex, and we look beyond the short-term impacts that we see today that may pressure our earnings.

So please turn to Slide 14 through 17. We're skipping over our macro view, which is outlined through Slides 8 through 13. It's exactly as we outlined a couple of months ago and you can -- it's fully outlined in our document. And if we look at Slide 14 and let's discuss our portfolio construction, more focus on prepayment risk, leverage and liquidity. Our portfolio is constructed for interest rates trading within a narrower historical range as is explained in our macro view. Approximately 40% of our portfolio is invested in commercial mortgage-backed securities, which offer the ultimate in prepayment protection. While 60% of our portfolio is invested in residential securities, where 90% of our investments have prepayment protection in the form of loan characteristics that limit the incentive to refinance. Characteristics such as lower balance loans, high LTV loans, geographic-specific loans and loans with low-weighted average note rates.

The other point I want to reiterate about our portfolio construction is that we are very comfortable in this global environment using the higher leverage on highly liquid, high-credit assets, especially given the durability of the financing markets. Our portfolio construction also allows us the flexibility to rapidly pivot to other opportunities when they arise.

And then finally, let's turn to Slide 19. This is where we end all of our calls. We like this long-term chart. We emphasize the fact that we are focused on the long term. You can take note that we made a change in this slide by including the S&P 500 financials. If you compare it to other quarters, you'll see the S&P 500 as a whole, there's nothing unusual in terms of where that line sits versus the other 3. But we really want to point out that for those of you who do have a requirement to be exposed to financials, you can see the relative attractiveness of holding Dynex Capital over the last 12 years or so relative to the overall S&P 500 Financials Index.

So as we said again, I'm going to just reiterate, we believe that the mortgage REIT sector and the, especially, Dynex Capital offer attractive long-term returns both in our preferred stock and our common stock. We bring to the table a very experienced management team. Our portfolio was constructed for what we consider to be a lower, narrower range than we have historically seen in interest rates. It's diversified between commercial securities and residential securities. We appreciate you joining our call today, and we are opening the call for questions.

(Operator Instructions) Your first question comes from Eric Hagen with KBW.

Congrats on a solid quarter. Can you just maybe guide us to the prepayment expectations for the portfolio in the second quarter just given kind of the rally in rates that we saw during the first quarter?

Eric, it's Smriti. We are expecting prepayment speeds to rise in the second quarter relative to the first quarter. The models right now are projecting anywhere between 30% -- 20% to 30% increase in the speeds and it's about 25% on the most sensitive bonds. We believe that the S curves in the models right now are pretty severe. Our entire book is probably more in the 10% to 15% increase relative to the first quarter.

Okay. And then when we kind of translate that to an earnings impact, are we talking somewhere in the range of kind of $0.005 to maybe $0.01 of earnings? Or are we talking something maybe a little bit more than that?

Probably, a little bit more than a $0.01, $0.01 to $0.015

$0.01 to $0.015. Great. The second question is just on the mix of the overall portfolio. I'm looking at the yield table that you guys show for the quarter and just kind of looking at the difference between the RMBS -- Agency RMBS and CMBS and noticing the delta there. And in Byron's opening comments, you guys talked about kind of a narrower range for interest rates, which I guess on its face implies that there's lower volatility in the market. So just thinking about the CMBS segment, I mean intuitively, you have to lever that maybe a little bit more to achieve the same kind of total return for the portfolio. Just how are you thinking about the mix between RMBS and CMBS just given that kind of 50-odd basis points in yield pickups you're getting for the RMBS?

Sure, yes. That is -- it's a very interesting tradeoff actually. So the way I would think about it, Eric, is that we have constructed the portfolio to respect a 2% to 3% range on the 10-year. And we are very cognizant that we could spend a good portion of time at the lower end of that range relative to the higher end of that range. So the CMBS and the prepayment-protected securities actually perform in the lower end of that interest rate range and then the coupon selection helps us perform in the upper end of that interest rate range.

And in reality, as you look at the returns on Agency RMBS, yes, you're right, in a low-volatility environment, they do offer anywhere from 20 to 30 basis points incremental return relative to the Agency CMBS, but that 20 to 30 basis points can rapidly disappear when you have a situation where you're moving down in rates very quickly and then staying there for some period of time. So we're making that (inaudible) pretty actively. And you also have pointed out correctly that the Agency CMBS, they would need to be levered more than the Agency RMBS to generate the same return. And the reason we get comfortable with that is because of roll down. And what that does is essentially, just with the passage of time, you actually earn back somewhere like 5 basis points per year on Agency CMBS because of the locked out nature of the cash flows. So we are more comfortable with that locked out nature, the prepayment protection and the roll down levering that cash flow higher and that's what -- that's that risk return tradeoff that we have.

That's excellent color.

Eric, let me add one other thing here about this range. On Slide 9, we outline -- this is the same slide we used in the last quarter, which is kind of why I skipped over the macro. It says more time between 2% to 3%. I think it's really important to understand the dynamic that we're describing there. We describe an even broader range by trying to show on Slide 10 this broader range of 2% to 4%. And we're trying to draw a connection between the amount of global debt. So we draw -- we create a dynamic where we say as you move down toward 2%, if you're not going to have a global crisis that's going to be a sustainable crisis, you're going to go through 2%, we believe you'll bounce right back up. We believe that there are factories that will push rates back up again. And then we talk about moving towards 3%, and we talk about factors that can push rates back down. And so even when you're thinking about this risk, often with prepayments, everyone thinks prepayments as if, oh wow, you're going to drop to a lower rate and you stay there. The dynamic that we're describing in this range and again not -- no one has a crystal ball, we're just assessing the factors that we see in front of us and the dynamic of pushing rates down for some period of time and then bringing rates back up again. And likewise, the same in the other direction.

So let me just again get to that macro view behind and how we think about prepayments. There's tons of scenarios. You can draw a scenario where rates drop and stay there or you can a draw scenario where rates drop and they come back up. And that's kind of the way we try to outline this narrower range. You noticed I didn't say volatility, that's kind of -- I'm just really bringing it down to what we call street man's language, which is a narrower interest rate range than we have seen historically. Does that makes sense? And can you tie that back to the thoughts on the prepayments?

Yes. That was good clarity.

And your next question comes from Trevor Cranston with JMP Securities.

The question on the 3-month LIBOR versus repo spread that you guys commented on briefly in the prepared remarks. Can you give us any indication of how much that impacted results in the first quarter kind of versus how much it'll impact the second quarter given where that spread stands today?

Sure. Trevor, so thank you for that question. The way we think about it is, so the 3-month LIBOR to 1-month repo spread has narrowed from a wide level of about 45 basis points sometime in 2018 in the third quarter and it's sitting right around 10 to 12 basis points today. So it's a narrowing of about 30, 35 basis points. And the way to think about that is with respect to the size of any one repo position relative to their swap position. So we are paying fixed on our swap position. We're receiving 3-month LIBOR, but then we're actually paying up on the funding side using a 1-month repo rate. So the wider that spread is between 3-month LIBOR and 1-month repo, the more net interest income benefit you get. And that net interest income benefit has been declining since the third quarter from a benefit of 45 basis points to the -- to about 10 to 12 basis points today and that affects entire repo position that is covered with interest rate swaps. So if you go back and look at, I think, our swap coverage relative to the repo book was somewhere around 80% last year, it's a little more like 100% this year, that should give you a sense for how big that number is. It's really quite significant. And just as a heuristic, obviously, if you have a $1 billion swap book and that basis declines by 10 basis points, you can do the math, it's pretty significant.

Okay. That's helpful. And then my second question was looking at the interest rate sensitivity tables in the appendix on Slide 27, I guess. The book value sensitivity to the down rate scenarios looks like it's increased. I was just curious if you got any color around that? And if it was just sort of tied to the fact that given how much rates have already declined, you were more comfortable that they didn't have as much room to go further down or just what the reasoning was for that change?

You're right. I mean that's exactly it. We saw the rally and that happened late in the first quarter as a bit of an overreaction to what Chairman Powell had said as well as everything else that was really happening fundamentally in the economy. And so obviously, this represents a snapshot of -- on March 31 of the book. And so it will show that type of sort of asymmetric return profile. I think the 10-year note on March 31 closed at 2.40% and that's what that reflects relative to the end of December.

Okay, great.

Trevor, one quick follow-up from your first question. If you look in our press release, we show the average pay swap pay fixed rate and receive rate. And you can sort of see what happened during the quarter and then you can kind of look at, to Smr's point, you kind of look at where the curve is today and you kind of back into the impact on the change basically from where we were at March to what the first quarter looks like -- for the second quarter -- what the second quarter looks like in terms of the 3-month LIBOR rate versus the 1-month LIBOR rate.

Your next question comes from Doug Harter with Crédit Suisse.

Byron, I know you were talking about just the level of rates being in a tight range. But can you just talk about how you think about leverage and portfolio construction as we go through this environment that's generally characterized by low volatility, but we have these bouts of spikes of volatility and kind of how you want to be positioned during the periods of relative calm?

Yes. So our main line and I probably said it for the last 4 years here at Dynex, 4 or 5, there's been bouts of volatility, periods of calm. And when we look at -- I mean one of the main points here, the key -- what we call our money theme at the beginning of this presentation is simply that we look at leverage on these liquid assets in a more comfortable fashion today than even we looked at them a year ago. And the reason is really rocked with the [end of] global risk environment. And the financing markets, in our opinion, are more durable. We use a quote in the document here from Chairman Powell. The speaking of the overall durability of the financial system. We think about the credit quality of these assets. Smriti already pointed out that on our DUS portfolio, which is my favorite, is, even if you really take a widening in spreads because of the leverage, that the DUS paper rolls down the curve nicely as it seasons. So you do have some cushion from that impact.

So let me just be real clear that one of our most key points here today is that we feel any investor, whether you're an individual, clearly passive investors or you're an institutional investor and you're managing equity or you're looking for returns, that leverage from high-quality, high-liquid assets is a very attractive trade in a globe with this much risk. And that does mean a higher leverage on these sectors. And by higher leverage if you compare coming out of 2008, right, you're real concerned about leverage coming out of it because you're not sure about the financial system, you're not sure about how many people have repo lines, how many people will be durable with their repo lines. We have far more visibility to that today than we had in 2008. And I would also argue that the financing markets are more durable today than they were in '04, '03, '02, 2000, 1998.

So for highly liquid assets. When you start to talk about leveraging credit assets, that's a different story. So we have an opinion on that. It may differ than some others, but I'll stand by that opinion. And I will bring on a ton of historical information about how credit assets have performed in bouts of volatility versus how the liquid assets have performed. Smriti, you want to add anything to that?

I do. Go ahead, Trevor. Did you want to follow up with that?

Yes, it's actually Doug.

Doug.

Oh, Doug.

I guess I was thinking more about, I guess, how you think about the -- your ability to absorb -- your comfort with absorbing kind of book value volatility economic return volatility over -- during that period, I guess, given the comfort you would have in the financing system that you just described?

Yes, I mean that's an interesting tradeoff as well. I think the way we're thinking about it is we're designing the book to have the ability to perform in a 2% to 3% 10-year note range. Obviously, Byron mentioned the larger range we're very cognizant of that. We're respecting the probability that we're going to spend more time at the lower end of the range than the upper end of the range. We think about the credit quality of the book, the fundability of the book and the flexibility of the book.

And the reason you take on the additional leverage is that it gives you the flexibility. It allows you to earn a return from a liquid asset and then it gives you the flexibility during the bouts of volatility to adjust yourself. So during a bout of volatility, we're evaluating whether the bout of volatility is going to turn into something very bad. And in that case, you have the liquidity in your portfolio to exit your positions pretty close to where you marked them, hopefully, right. And liquid assets have demonstrated time and again from 1981, I would argue to you guys that, that 30-year MBS have been that type of asset that you can sell in a disruption. So if something's going really poorly, you have the ability to exit your position. And then if there's a bout of volatility where you actually have an opportunity to deploy capital, then you can accept that temporary change in your book value, and you have the liquidity and the flexibility to be able to add in that environment. So that's really the big idea. The big idea is you keep a liquid position. You have a liquid portfolio, you keep a big position of liquidity, cash and unencumbered assets. This is something we pointed out a couple of quarters ago, having that cash and unencumbered asset position allows you even with a higher leverage to manage through those bouts of volatility. So if the bout of volatility is going to turn bad, you have exit -- you can exit your positions because you have liquid assets. If it's something that you think is temporary, you have the cash and the capital to be able to deploy during that scenario. So that's really why we're saying right now it's behind -- this is the thinking behind the current construction.

And Doug, let me point out the -- as Smriti mentioned 1981, that's because when I started my career and I've been in a capital committing [seat], and when we talk about an experienced management team. I wasn't an investment banker; I wasn't an analyst or some other peripheral role. I've been committing capital in these capital markets both on credit and mortgage-backed securities for almost 40 years at this point. And so if you look back historically and you do the research on it, you will see that the agency securities, securities backed by the US government have held up through every single crisis. In other words, you've been able to get liquidity. You either sell the securities or you can borrow against them. That's really important when you talk about bouts of volatility that may come from so many different uncertain factors. Globally you don't know where the bout of the volatility may ultimately come from. So we feel very comfortable when we look back, especially most recent is 2008. In 2006, leveraging credit assets looked like it was great. By 2007, the dramatic turn was a function of liquidity. In other words, those assets go from being looking liquid to being completely illiquid within a matter of hours actually. It's pretty amazing. So that's what factors into. And when we talk about the long-term returns, long-term investors, we have a lot of retail investors. We are speaking to them. We are telling you that from a long-term perspective when we look at the globe and this amount of risk that we are more comfortable taking this type of liquidity risk with the higher leverage. We've got liquidity to cushion the book value volatility because that's what you do assume. You assume some book value volatility in that process, and we believe it's the best investment opportunity versus others such as leveraging more illiquid deep credit assets.

Your next question comes from Christopher Nolan with Ladenburg Thalmann.

Byron, it sounds like to me that you guys are anticipating narrower investment spreads and higher leverage going forward. Is that fair?

No. I mean, I think it's hard to predict on the spread. This is like at the end of the last year, spreads widen out immediately right and gave you an opportunity. They've widen -- they've come back in, but they're still wider than the tight of last year. So it's almost when we talk about, just like a second ago, bouts of volatility and periods of calm. It's hard to predict exactly where those spreads will be. However, in terms of leverage, we are saying that we are more comfortable with the higher leverage than we are -- than, let's say, 2008, 2009, 2010, '11, '12, '13, '14. We're definitively saying that we believe one of your best opportunities is higher leverage on higher liquid assets.

Now in terms of net spread and Smriti you might want to comment on it, but -- or Steve. But yes, we are saying that in the short-term prepayments or the spread between 3-month LIBOR and 1-month repo could pressure net spreads that it did -- as it has recently.

Yes, that's basically what we're saying. That's correct.

Okay. Looking at this from the dividend perspective for the additional shares issued. I'm assuming that you'll need leverage ratios to go north of 9x adjusted to begin to cover the incremental shares. I mean, am I missing something?

Well, let me just say, I'm definitely comfortable. We know we've moved leverage up in 1 turn type increments. So we've been very disciplined in our process. You can go back 2 years. We started talking about taking leverage up. And now we're kind of even pointing it out more. So yes, we've been moving leverage up in 1 turn increments. We could see a day where spreads widen out and you say you take leverage up during a tight time period. And when times are better, you bring leverage back down and that's ultimately how we look over the long term. Again, long-term view in terms of managing our overall leverage. Smriti, do you want anything to add to this?

I think that one of the things we have to consider as we observe in the earnings deck is that right now, we're sitting with the Fed on hold, right, and we're sitting with that 1-month, 3-month repo spread at a historic tight and short-term prepayment speeds that are rising and could continue to rise further. So yes, net interest spread is going to be pressured, right? We are also saying that historically, these flat or inverted yield curves have typically resolved themselves within a 6- to 9-month period. And eventually, you get an environment that supports higher net interest spreads and underlying some of our thinking is to opportunistically take that leverage up when assets widen or cheapen enough and that opportunity presents itself. Also considering the fact that ultimately, the Fed will end up supporting a steeper yield curve.

Okay, great. And then I guess final question. For further equity raises. I mean, the current equity raise that you did was slightly dilutive to book value per share, would you take the same type of dilution for future equity raises?

Chris, it's Steve. That's something that we'll consider the tradeoff. You're right, there was a modest dilution to book value per share. But when you look at the return opportunity at the time that we took that capital down, we -- frankly, we took the capital down when spreads were probably their widest and we were able to deploy it.

Couple of years.

We were able to deploy it at ROEs that were a couple hundred basis points or higher. It's where the marginal return was earlier in the year and at the end of last year for the couple as Byron said. So it's that kind of tradeoff, giving up a little bit of book value in order to add assets. Now when you're adding those assets at wider spreads, you also potentially can get some of that book value back as spreads tighten on those assets that you're -- that you've added at wider spreads. And then the construction of the DUS that we buy, they're longer duration assets. And as they -- they'll roll down the curve and you'll get some book value back on that as well.

So and the other key point strategically, it is valuable in our opinion that we continue to be very disciplined about how we grow our company over time. We believe that -- whereas we don't believe that larger scale will be a predictor of longer-term returns. They haven't been in the past. You can go back to -- I pointed out in past calls. You go back and look at larger companies. But we do think there is value to our shareholders by continuing to grow and scale up our asset platform. We do believe that when you think about institutional investors, passive investors and retail. Those are the 3 groups now and that's different than 10 years ago. Ten years ago, it was retail and just institutional. Now, you got the passive investors. There is value. One of these groups very concerned about relative market cap, relative size. And we believe that the more interest we get from that will bring value to the rest of our shareholders by just bringing more liquidity to our stock, bringing a larger bid to our stock, et cetera, et cetera. So we do have in our strategic plan a desire to grow the company. We want to be very, very disciplined about how we do that. We -- and what we consider to be a shareholder-friendly manner sometimes may be above book or slightly below book. But over time, we believe that it will be accretive to earnings and book to value over the long term.

(Operator Instructions) You have a question from Eric Hagen with KBW.

I noticed that the level of dollar roll specialness has appeared to maybe go away or be very, very small at this point. I'm just curious how we should think about the overall mix within the 30-year fixed rate exposure kind of bucket or segment between pools and TBAs? And maybe even how that's changed in the first quarter or the first month of the second quarter?

Sure. Yes, Eric, the issue there -- what I would say is there's a couple things that will affect our decision to change that mix. One is going to be the UMBS implementation that is going to happen in June. So we're just waiting to see how that works out in terms of the dollar rolls and that's really affected the level of dollar rolls at this point. And that's a technical factor obviously. So that's something that has put some pressure on the rolls. The second thing that put pressure on the rolls was just the small period of time that we spent below 2.50% on the 10-year note and mortgage rates got to 4%, that caused a decline at the end of the first quarter, we've actually seen a pop back in the rolls. April, just so you guys know, April speeds came in across the board much, much slower than the street had projected. So that's been a real positive in terms of how that's evolved. Now we do expect speeds to pick up in May and June and that's reflected in the rolls. But I think having April speeds come in better than expected was very positive for the roll market. We have less exposure to 4.5s than we did before. So that has not -- for us, that dollar roll decline hasn't affected us as much. But what I would say is, from the end of the quarter, we may have seen somewhere between 10 to 20 basis points of improvement in the implied financing rates.

Okay. Great. And do you have a sense for...

For now, I think our mix is going to be relatively stable, pools versus TBA until we get through this UMBS stuff.

That's helpful color. Do you have a -- do you have a sense for how book value did in April? Can you give us an update there?

I think it's been fairly stable to slightly higher. The spreads on Agency CMBS continue to come in. We're seeing a little underperformance in the 30-year sector just because of supply. It's been stable.

(Operator Instructions) And we do not have any questions at that time, and I will turn the call over to the presenters.

Let me just point out here because I listen to the questions that are here and they're very interesting. Because I think back to 2006, I think back to the late 1990s, I think back to 1994, I think back to the late 1980s. If you look at Slide 10 and Slide 11, and these will be my last comments. But I'm just thinking about how you, the analyst community, are trying to sort through all the complexities. We started this presentation off with a very -- you can go to that World Economic Forum Report. I think it's a great one. And then on Slide 10 and 11, this really starts to put in a couple of very simple terms this environment. You've got an enormous amount of global debt, and you can see what has happened to the yields. They have narrowed enormously. If you follow Japan, and you go back and look at their charts, you'll see their yields narrowed down to such a narrow trading rates. I'm not using the word volatility. That's a nice theoretical word to use in your models. Let's talk about the reality of a narrow interest rate range. An enormous amount of global debt that leaves the global economy fragile.

If you look on Slide 11, you'll see this enormous increase in Central Bank balance sheets. And that's the backdrop by which we get to our opinion that higher leverage on high-quality liquid assets is unattractive trade. And it's enough to get through this period. It also backs up our opinion. If you look historically at those periods that I point out, the shorter duration of period, 6 to 9 months of structures of yields and interest rate curves that we have seen historically. Hard to predict the future because of all the factors that are changing, but it is important to understand history. And because we're saying that we -- you're talking to a very experienced management team from our accounting team, to our investment professionals, we are very disciplined in our approach. But I understand the complexity in the questions that you guys are trying to answer and trying to get to. But I would urge you and all of our investors, retail, passive and institutional to take a long-term view. With this type of dividend yield offered by both our preferred and our common, it can cushion any type of -- most of the book value volatility that you will get over time. So with that, we thank you so much for joining our call, and we'll look forward to chatting with you again in 3 months.

This concludes today's conference call. You may now disconnect.