v3.26.1
Financial Derivatives
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Derivatives Financial Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages certain risks associated with its investments and borrowings, including interest rate, credit, liquidity, and foreign exchange rate risk primarily by managing the amount, sources, and duration of its investments and borrowings, and through the use of derivative financial instruments. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of its known or expected cash receipts and its known or expected cash payments principally related to its investments and borrowings. Subject to maintaining its qualification as a REIT, the Company may also use derivative financial instruments for speculative purposes.
The following table details the fair value of the Company's holdings of financial derivatives as of June 30, 2026 and December 31, 2025:
June 30, 2026December 31, 2025
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities purchase contracts$486 $87 
TBA securities sale contracts13 170 
Fixed payer interest rate swaps131,284 76,670 
Fixed receiver interest rate swaps22,445 52,228 
Credit default swaps on asset-backed indices1,127 2,206 
Credit default swaps on corporate bond indices15,951 4,621 
Options3,237 5,607 
Futures— 1,095 
Forwards280 14 
Total return swaps63 24 
Warrants3 1 
Total financial derivatives–assets, at fair value174,889 142,723 
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts(9)(54)
TBA securities sale contracts(2,257)(544)
Fixed payer interest rate swaps(3,540)(13,411)
Fixed receiver interest rate swaps(39,526)(13,386)
Credit default swaps on asset-backed securities(2)(2)
Credit default swaps on corporate bonds(111)(155)
Credit default swaps on corporate bond indices(32,305)(25,407)
Options(2,363)— 
Futures(680)(45)
Forwards— (69)
Total financial derivatives–liabilities, at fair value(80,793)(53,073)
Total$94,096 $89,650 
Interest Rate Swaps
The following tables provide information about the Company's fixed payer interest rate swaps as of June 30, 2026 and December 31, 2025:
June 30, 2026:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2026$208,563 $332 3.67 %3.68 %0.26
20272,609,445 24,164 3.41 3.68 1.17
20283,121,613 23,270 3.61 3.68 1.82
2029172,786 5,649 2.97 3.68 3.11
2030630,245 15,923 3.31 3.68 4.18
2031639,291 19,709 3.26 3.68 4.88
2032170,723 10,416 2.81 3.68 6.10
2033280,668 10,164 3.32 3.68 6.77
203451,656 2,234 3.38 3.68 8.17
2035252,305 4,608 3.74 3.68 9.02
2036224,503 393 3.97 3.68 9.86
203735,000 4,868 2.61 3.68 11.12
203911,322 270 3.85 3.68 13.19
204077,873 1,122 3.97 3.68 13.89
204161,766 244 4.09 3.68 14.80
204512,500 195 4.07 3.68 18.81
2050500 253 0.98 3.63 24.32
20532,780 397 3.32 3.68 27.50
20541,095 75 3.76 3.68 28.48
2055105,166 3,136 3.99 3.68 29.19
205663,657 322 4.13 3.68 29.79
Total$8,733,457 $127,744 3.49 %3.68 %3.52
December 31, 2025:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2026$288,763 $(207)3.78 %3.87 %0.70
20274,582,588 (920)3.48 3.87 1.66
2028483,753 3,341 3.22 3.87 2.56
2029248,214 2,879 3.09 3.87 3.65
2030779,845 4,879 3.34 3.87 4.69
2031157,766 17,798 1.51 3.87 5.45
2032173,815 8,916 2.80 3.87 6.57
2033240,259 8,205 3.20 3.87 7.23
2034235,312 6,594 3.35 3.87 8.72
2035664,582 1,524 3.75 3.87 9.59
20361,102 273 1.19 3.87 10.13
203745,000 4,753 2.81 3.87 11.66
203832,500 (258)4.01 3.87 12.67
203911,322 173 3.85 3.87 13.69
2040125,645 658 3.98 3.87 14.51
204512,500 115 4.07 3.87 19.30
2050500 248 0.98 3.64 24.82
20532,780 388 3.32 3.87 27.99
20543,874 223 3.81 3.87 28.99
2055133,654 3,677 3.99 3.87 29.69
Total$8,223,774 $63,259 3.42 %3.87 %4.03
The following tables provide information about the Company's fixed receiver interest rate swaps as of June 30, 2026 and December 31, 2025:
June 30, 2026:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2026$3,684 $7 3.68 %3.97 %0.36
2027745,538 (5,989)3.68 3.50 1.15
20282,255,220 (7,027)3.68 3.83 2.00
2029477,084 6,026 3.68 4.37 2.80
2030605,387 (3,787)3.68 3.76 4.05
2031617,924 (1,074)3.68 3.85 4.88
203239,518 (1,198)3.68 3.41 6.25
2033182,410 2,791 3.68 4.13 7.32
203428,103 107 3.68 3.98 7.80
2035340,833 (1,756)3.68 3.90 8.85
2036294,998 (633)3.68 3.96 9.80
203817,270 (928)3.68 3.54 12.48
204039,332 (851)3.68 3.92 14.12
204194,744 (131)3.68 4.11 14.77
2050500 (262)3.68 0.90 24.32
20539,111 (1,293)3.68 3.33 27.49
20547,004 (623)3.68 3.65 28.37
205550,167 (1,141)3.68 4.02 29.36
205652,184 681 3.68 4.23 29.80
Total$5,861,011 $(17,081)3.68 %3.85 %4.36
December 31, 2025:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2026$409,789 $2,109 3.87 %4.75 %0.18
20272,198,911 1,264 3.87 3.44 1.77
2028667,324 8,294 3.87 3.82 2.74
2029477,084 15,486 3.87 4.37 3.29
2030775,880 8,178 3.87 3.72 4.56
20315,485 (117)3.87 3.14 5.72
203280,390 (1,051)3.87 3.38 6.73
2033172,564 6,043 3.87 4.15 7.86
2034163,483 1,485 3.87 3.84 8.54
2035865,242 3,483 3.87 3.83 9.43
203829,938 (1,251)3.87 3.54 12.98
20395,637 (139)3.87 3.76 13.19
2040105,198 (1,551)3.87 3.90 14.66
2050500 (258)3.87 0.90 24.82
20539,111 (1,263)3.87 3.33 27.99
20547,004 (606)3.87 3.65 28.87
205582,955 (1,264)3.87 4.06 29.89
Total$6,056,495 $38,842 3.87 %3.78 %4.51
Credit Default Swaps
The following table provides information about the Company's credit default swaps as of June 30, 2026 and December 31, 2025:
June 30, 2026December 31, 2025
Type(1)
NotionalFair ValueWeighted Average Remaining Term (Years)NotionalFair ValueWeighted Average Remaining Term (Years)
($ in thousands)
Asset:
Long:
Credit default swaps on asset-backed indices$177 $16 11.50$190 $9 11.99
Credit default swaps on corporate bond indices136,745 15,951 2.95165,010 4,621 3.69
Short:
Credit default swaps on asset-backed indices(9,153)1,111 34.93(26,693)2,197 33.05
Liability:
Short:
Credit default swaps on asset-backed securities(45)(2)9.24(46)(2)9.74
Credit default swaps on corporate bonds(13,000)(111)0.97(13,000)(155)1.47
Credit default swaps on corporate bond indices(983,097)(32,305)4.53(1,034,704)(25,407)4.76
$(868,373)$(15,340)4.55$(909,243)$(18,737)5.74
(1)Long notional represents contracts where the Company has written protection and short notional represents contracts where the Company has purchased protection.
Futures
The following table provides information about the Company's long and short positions in futures as of June 30, 2026 and December 31, 2025:
June 30, 2026December 31, 2025
DescriptionNotional AmountFair ValueRemaining Months to ExpirationNotional AmountFair ValueRemaining Months to Expiration
(In thousands)(In thousands)
Assets:
Short Contracts:
U.S. Treasury futures$— $— — $(207,400)$1,095 2.64 
Liabilities:
Long Contracts:
U.S. Treasury futures— — — 1,900 (35)2.63 
Short Contracts:
U.S. Treasury futures(250,500)(680)0.69 (49,800)(10)3.00 
Total, net$(250,500)$(680)0.69 $(255,300)$1,050 2.71 
Warrants
The following table provides information about the Company's warrants contracts to purchase shares as of June 30, 2026 and December 31, 2025:
June 30, 2026December 31, 2025
DescriptionNumber of Shares Underlying WarrantFair ValueRemaining Years to ExpirationNumber of Shares Underlying WarrantFair ValueRemaining Years to Expiration
(In thousands)(In thousands)
Warrants114 $3 n/a109 $1 n/a
TBAs
The Company transacts in the forward settling TBA market. Pursuant to these TBA transactions, the Company agrees to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. TBAs are generally liquid, have quoted market prices, and represent the most actively traded class of MBS. The Company uses TBAs to mitigate interest rate risk, usually by taking short positions. The Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for investment purposes, including holding long positions. The Company does not usually take delivery of TBAs; rather, it settles the associated receivable and payable with its trading counterparties on a net basis. Transactions with the same counterparty for the same TBA that result in a reduction of the position are treated as extinguished.
As of June 30, 2026 and December 31, 2025, the Company had outstanding TBA purchase and sale contracts as follows:
June 30, 2026December 31, 2025
TBA Securities
Notional Amount(1)
Cost
Basis(2)
Market Value(3)
Net Carrying Value(4)
Notional Amount(1)
Cost
Basis(2)
Market Value(3)
Net Carrying Value(4)
(In thousands)
Purchase contracts:
Assets$132,854 $126,633 $127,119 $486 $25,044 $23,572 $23,659 $87 
Liabilities12,695 12,133 12,124 (9)64,444 61,685 61,631 (54)
145,549 138,766 139,243 477 89,488 85,257 85,290 33 
Sale contracts:
Assets(17,822)(16,924)(16,911)13 (122,997)(117,545)(117,375)170 
Liabilities(330,381)(318,956)(321,213)(2,257)(205,377)(206,488)(207,032)(544)
(348,203)(335,880)(338,124)(2,244)(328,374)(324,033)(324,407)(374)
Total TBA securities, net$(202,654)$(197,114)$(198,881)$(1,767)$(238,886)$(238,776)$(239,117)$(341)
(1)Notional amount represents the principal balance of the underlying Agency RMBS.
(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.
(3)Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.
(4)Net carrying value represents the difference between the market value of the TBA contract as of period end and the cost basis, and is reported in Financial derivatives-assets, at fair value and Financial derivatives-liabilities, at fair value on the Consolidated Balance Sheet.
Options
The following tables provide information about the Company's options contracts as of June 30, 2026 and December 31, 2025:
June 30, 2026December 31, 2025
TypeNotional AmountFair ValueMonths to ExpirationNotional AmountFair ValueMonths to Expiration
(In thousands)(In thousands)
Long put options on listed indices$6,645 $3,237 6.87$8,575 $5,607 7.20
Short put options on listed indices(4,350)(2,363)5.53— — — 
Total put options$2,295 $874 6.34$8,575 $5,607 7.20
Gains and losses on the Company's derivative contracts for the three- and six-month periods ended June 30, 2026 and 2025 are summarized in the tables below:
Three-Month Period Ended June 30, 2026
Derivative TypePrimary 
Risk
Exposure		Net Realized Gains (Losses) on Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial DerivativesChange in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swapsInterest Rate$5,976 $(5,950)$26 $171 $14,323 $14,494 
Credit default swaps on asset-backed indicesCredit503 503 (644)(644)
Credit default swaps on asset-backed securitiesCredit1 1 — — 
Credit default swaps on corporate bond indicesCredit(2,516)(2,516)(508)(508)
Credit default swaps on corporate bondsCredit(34)(34)23 23 
TBAsInterest Rate4,785 4,785 (4,781)(4,781)
FuturesInterest Rate4,630 4,630 (1,686)(1,686)
ForwardsCurrency(137)(137)303 303 
Total return swapsCredit141 141 9 9 
OptionsCredit(2,412)(2,412)(2,741)(2,741)
WarrantsCredit— — 2 2 
Total$5,976 $(989)$4,987 $171 $4,300 $4,471 
Three-Month Period Ended June 30, 2025
Derivative TypePrimary 
Risk
Exposure		Net Realized Gains (Losses) on Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial DerivativesChange in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swapsInterest Rate$6,721 $(1,321)$5,400 $2,267 $(12,939)$(10,672)
Credit default swaps on asset-backed indicesCredit(159)(159)466 466 
Credit default swaps on corporate bond indicesCredit(5,429)(5,429)(9,424)(9,424)
Credit default swaps on corporate bondsCredit67 67 (72)(72)
TBAsInterest Rate(286)(286)(804)(804)
FuturesInterest Rate903 903 (747)(747)
ForwardsCurrency(1,015)(1,015)(364)(364)
OptionsCredit— — (3,991)(3,991)
Total$6,721 $(7,240)$(519)$2,267 $(27,875)$(25,608)
Six-Month Period Ended June 30, 2026
Derivative TypePrimary 
Risk
Exposure		Net Realized Gains (Losses) on Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial DerivativesChange in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swapsInterest Rate$15,107 $155 $15,262 $(2,092)$14,958 $12,866 
Credit default swaps on asset-backed indicesCredit385 385 (644)(644)
Credit default swaps on asset-backed securitiesCredit1 1 — — 
Credit default swaps on corporate bond indicesCredit(990)(990)(1,043)(1,043)
Credit default swaps on corporate bondsCredit(66)(66)44 44 
TBAsInterest Rate9,543 9,543 (1,427)(1,427)
FuturesInterest Rate8,035 8,035 (1,730)(1,730)
ForwardsCurrency501 501 336 336 
Total return swapsCredit149 149 39 39 
OptionsCredit(8,661)(8,661)3,070 3,070 
WarrantsCredit— — 2 2 
Total$15,107 $9,052 $24,159 $(2,092)$13,605 $11,513 
Six-Month Period Ended June 30, 2025
Derivative TypePrimary 
Risk
Exposure		Net Realized Gains (Losses) on Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate SwapsNet Realized Gains (Losses) on Financial DerivativesChange in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate SwapsChange in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swapsInterest Rate$17,539 $837 $18,376 $180 $(38,537)$(38,357)
Credit default swaps on asset-backed indicesCredit42 42 352 352 
Credit default swaps on corporate bond indicesCredit(5,561)(5,561)(6,241)(6,241)
Credit default swaps on corporate bondsCredit59 59 (86)(86)
TBAsInterest Rate(214)(214)(1,418)(1,418)
FuturesInterest Rate(139)(139)(2,548)(2,548)
ForwardsCurrency(1,441)(1,441)(586)(586)
WarrantsCredit— — (8)(8)
OptionsCredit— — (3,832)(3,832)
Total$17,539 $(6,417)$11,122 $180 $(52,904)$(52,724)
The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the six-month period ended June 30, 2026 and the year ended December 31, 2025:
Derivative TypeSix-Month
Period Ended June 30, 2026		Year Ended December 31, 2025
(In thousands)
Interest rate swaps$15,264,388 $11,501,990 
Credit default swaps882,684 1,164,093 
TBAs721,538 401,288 
Futures241,014 213,100 
Forwards35,820 22,082 
Options6,916 6,382 
Total return swaps4,790 428 
Warrants111 105 
From time to time the Company enters into credit derivative contracts for which the Company sells credit protection ("written credit derivatives"). As of June 30, 2026 and December 31, 2025, all of the Company's open written credit derivatives were credit default swaps on either mortgage/asset-backed indices (CMBX and ABX indices) or corporate bond indices (CDX), collectively referred to as credit indices, or on individual corporate bonds, for which the Company receives periodic payments at fixed rates from credit protection buyers, and is obligated to make payments to the credit protection buyer upon the occurrence of a "credit event" with respect to underlying reference assets.
Written credit derivatives held by the Company at June 30, 2026 and December 31, 2025 are summarized below:
Credit DerivativesJune 30, 2026December 31, 2025
(In thousands)
Fair Value of Written Credit Derivatives, Net$15,967 $4,630 
Notional Value of Written Credit Derivatives(1)
136,922 165,200 
(1)The notional value is the maximum amount that a seller of credit protection would be obligated to pay, and a buyer of credit protection would receive, upon occurrence of a "credit event." Movements in the value of credit default swap transactions may require the Company or the counterparty to post or receive collateral. Amounts due or owed under credit derivative contracts with an International Swaps and Derivatives Association ("ISDA") counterparty may be offset against amounts due or owed on other credit derivative contracts with the same ISDA counterparty. As a result, the notional value of written
credit derivatives involving a particular underlying reference asset or index has been reduced (but not below zero) by the notional value of any contracts where the Company has purchased credit protection on the same reference asset or index with the same ISDA counterparty.
A credit default swap on a credit index or a corporate bond typically terminates at the stated maturity date in the case of corporate indices or bonds, or, in the case of ABX and CMBX indices, the date that all of the reference assets underlying the index are paid off in full, retired, or otherwise cease to exist. Implied credit spreads may be used to determine the market value of such contracts and are reflective of the cost of buying/selling credit protection. Higher spreads would indicate a greater likelihood that a seller will be obligated to perform (i.e., make protection payments) under the contract. In situations where the credit quality of the underlying reference assets has deteriorated, the percentage of notional values that would be paid up front to enter into a new such contract ("points up front") is frequently used as an indication of credit risk. Credit protection sellers entering the market in such situations would expect to be paid points up front corresponding to the approximate fair value of the contract. As of June 30, 2026, the implied credit spreads on the Company's outstanding written credit derivative ranged from 57 to 286 basis points as compared to 50 to 316 basis points as of December 31, 2025. Total net up-front payments (paid) or received relating to written credit derivatives outstanding as of June 30, 2026 and December 31, 2025 was $17.0 million and $4.6 million, respectively.