v3.26.1
Derivatives
 6 Months Ended
Jun. 30, 2026
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. Please refer to Note 1 for more information about these securities.
The table below provides detail of the Company’s gains and losses by type of derivative instrument for the periods indicated:
Three Months EndedSix Months Ended
June 30,June 30,
Type of Derivative Instrument2026202520262025
($s in thousands)
U.S. Treasury futures$16,568 $6,320 $51,876 $(38,027)
Interest rate swaps
135,781 (72,203)222,070 (188,930)
Interest rate swaptions
(4,275)182 (4,610)993 
Options on U.S. Treasury futures
— — (2,656)— 
TBA securities
(19,229)7,608 (33,108)49,783 
Gain (loss) on derivative instruments, net$128,845 $(58,093)$233,572 $(176,181)

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, 2026December 31, 2025
($s in thousands)
Options on U.S. Treasury futures
Derivative assetsEconomic hedging$— $2,657 
TBA securitiesDerivative assetsInvesting8,441 7,841 
Total derivatives assets$8,441 $10,498 
Interest rate swaptions
Derivative liabilities
Economic hedging$8,655 $4,045 
TBA securitiesDerivative liabilitiesInvesting462 785 
Total derivatives liabilities$9,117 $4,830 
The table below presents information regarding the long positions in SOFR-based interest rate swaptions and options on U.S. Treasury futures held by the Company as of the dates indicated:
Option
Underlying Financial Instrument
($s in thousands)
Cost (1)
Fair Value
Carrying Value (1)
Notional Amount
Average Fixed Receive Rate
Type of Instrument
As of June 30, 2026:
Interest rate swaptions
$11,725 $3,070 $(8,655)$750,000 3.25%5 year SOFR-based swap
Options on U.S. Treasury futures
— — — — n/a10-year U.S. Treasury future
As of December 31, 2025:
Interest rate swaptions
$11,725 $7,680 $(4,045)$750,000 3.25%5 year SOFR-based swap
Options on U.S. Treasury futures
3,981 2,657 2,657 500,000 n/a10-year U.S. Treasury future
(1)The Company pays the premium for its interest rate swaptions at the end of the option period, so the carrying value on the Company's consolidated balance sheets is fair value, net of the payable for the unpaid premium as of the periods indicated. The Company pays the premium for its options on U.S. Treasury futures at inception, so the carrying value is equal to the fair value as of the periods indicated.
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 $(38) million as of June 30, 2026 and a net asset position of $22 million as of December 31, 2025, and its interest rate swaps were in a net asset position of $173 million as of June 30, 2026 and net liability position of $(46) million as of December 31, 2025. 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 $558 million as of June 30, 2026 and $392 million as of December 31, 2025, which was recorded within “cash collateral posted to counterparties.” The Company had a margin receivable of $52 million as of June 30, 2026 and $17 million as of December 31, 2025 recorded within “due from counterparties.”
The table below presents information regarding the pay fixed/receive variable SOFR-based interest rate swaps the Company held as of the dates indicated:
June 30, 2026December 31, 2025
Pay Fixed Interest Rate Swaps -
Years to Maturity
Notional Amount
Weighted Average
Pay Fixed Rate
Notional Amount
Weighted Average
Pay Fixed Rate
($s in thousands)
3-5 years
$4,375,000 3.45 %$2,450,000 3.42 %
5-7 years
4,060,000 3.65 %4,070,000 3.66 %
7-10 years
5,065,000 3.86 %3,090,000 3.87 %
10-15 years — — %75,000 3.77 %
15-20 years590,000 4.40 %— — %
$14,090,000 3.70 %$9,685,000 3.66 %
The table below presents information regarding the notional amounts of the short positions in U.S. Treasury futures held by the Company as of the dates indicated:
U.S. Treasury Futures
June 30, 2026December 31, 2025
($s in thousands)
5-year U.S. Treasury futures$(750,000)$(30,000)
10-year U.S. Treasury futures
(2,516,500)(1,475,000)
30-year U.S. Treasury futures
(991,800)(1,153,500)
$(4,258,300)$(2,658,500)
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, 2026December 31, 2025
($s in thousands)
Implied market value (1)
$2,517,294 $3,121,122 
Implied cost basis (2)
2,509,315 3,114,066 
Net carrying value (3)
$7,979 $7,056 
(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 $8,441 and derivative liabilities of $462 as of June 30, 2026 and $7,841 and $785, respectively, as of December 31, 2025.

Volume of Activity
The table below summarizes changes in the Company’s derivative instruments for the six months ended June 30, 2026:
Type of Derivative InstrumentBeginning
Notional Amount-Long (Short)		AdditionsSettlements,
Terminations,
or Pair-Offs		Ending
Notional Amount-Long (Short)
($s in thousands)
U.S. Treasury futures$(2,658,500)$(14,876,500)$13,276,700 $(4,258,300)
Interest rate swaps
9,685,000 4,415,000 (10,000)14,090,000 
Interest rate swaptions
750,000 — — 750,000 
Options on U.S. Treasury futures
500,000 — (500,000)— 
TBA securities3,189,000 22,929,000 (23,558,000)2,560,000 

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, 2026 and December 31, 2025:
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, 2026
Options on U.S. Treasury futures
$— $— $— $— $— $— 
TBA securities8,441 — 8,441 (462)(6,581)1,398 
Derivative assets$8,441 $— $8,441 $(462)$(6,581)$1,398 
December 31, 2025
Options on U.S. Treasury futures
$2,657 $— $2,657 $— $— $2,657 
TBA securities7,841 — 7,841 (689)(6,333)819 
Derivative assets$10,498 $— $10,498 $(689)$(6,333)$3,476 
Offsetting of Liabilities
($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, 2026
Interest rate swaptions
$8,655 $— $8,655 $— $— $8,655 
TBA securities462 — 462 (462)— — 
Derivative liabilities$9,117 $— $9,117 $(462)$— $8,655 
December 31, 2025
Interest rate swaptions
$4,045 $— $4,045 $— $— $4,045 
TBA securities785 — 785 (689)(96)— 
Derivative liabilities$4,830 $— $4,830 $(689)$(96)$4,045 
(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.”