AGNC Investment Corp (NASDAQ: AGNC) reported Q3 EPS of $0.59, $0.10 better than the analyst estimate of $0.49.

"In the third quarter, financial market volatility increased in response to weakening global economic indicators and escalating U.S. - China trade tensions. The Federal Reserve (the \"Fed\"), in turn and consistent with recent messaging, lowered the federal funds target rate 25 basis points at each of its July, September, and October meetings," said Gary Kain, the Company's Chief Executive Officer and Chief Investment Officer. \"In addition, following a dislocation in government repo markets, the Fed added substantial liquidity to the funding markets beginning in mid-September through its open market operations. The Fed also subsequently announced its intention to continue its open market operations into 2020 and expand its balance sheet through the acquisition of Treasury bills beginning in mid-October and extending through at least the first quarter of 2020.

"As a result of this weakening global macroeconomic outlook and monetary easing actions by central banks, interest rates declined, and the yield curve flattened during the third quarter. Spreads on Agency mortgage-backed securities correspondingly widened relative to U.S. Treasury and interest rate swap hedges during the quarter due in part to heightened prepayment concerns and an increase in the supply of newly originated MBS associated with the lower rate environment.

"As evidenced by our financial results, our portfolio was very well-positioned for the current environment. Our holdings of prepay-protected pools and lower coupon TBA securities have largely insulated the portfolio from the negative effects of faster prepayment speeds on generic pools and higher coupon TBAs. Furthermore, larger prepayment risk premiums on Agency MBS, coupled with a hedging strategy optimized for the current interest rate landscape, have materially improved the expected returns on new and existing investments."

"Despite volatile and challenging market conditions, AGNC's economic return on tangible common equity for the third quarter was 2.7%, consisting of $0.48 in dividends and a $(0.03) decrease in tangible net book value per common share," commented Peter Federico, the Company's President and Chief Operating Officer. "In addition, despite the significant yield curve flattening, AGNC generated $0.59 of net spread and dollar roll income, excluding catch-up premium amortization, in the third quarter, as our substantial hedge repositioning in recent quarters provided a strong tailwind to our third quarter earnings and provided stability in our net book value. Looking ahead, while funding dynamics have been a headwind to earnings throughout the year and continue to be challenging, we are encouraged by the recent actions taken by the Fed to provide additional liquidity to the system. We believe that the focus being placed on the issue by the financial markets and the Fed should serve as a catalyst for the implementation of additional short and medium term solutions to improve and stabilize repo funding levels relative to other short term interest rates."

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