11 unchanged sentences
In March 2020, the Federal Open Market Committee lowered the Federal Funds target range to 0 to 0.25%.
−Removed: We currently do not have any interest rate hedges in place given our expectation that normal correlations between hedging instruments and portfolio assets would not follow historical patterns.
−Removed: We intend to resume interest rate hedging activity when normal market correlations resume in the fixed income markets.
+Added: We did not have any interest rate hedges in place as of June 30, 2020 due to limited interest rate sensitivity and prevailing market conditions.
+Added: We resumed purchasing 30 year fixed-rate Agency RMBS in July 2020 and financed these purchases with repurchase agreement borrowings.
+Added: We entered into interest rate swaps to mitigate our interest rate risk associated with these borrowings.
Interest Rate Effect on Net Interest Income
Our operating results depend in large part upon differences between the yields earned on our investments and our cost of borrowing and interest rate hedging activities.
−Removed: Most of our repurchase agreements provide financing based on a floating rate of interest calculated on a fixed spread over LIBOR.
−Removed: The fixed spread will vary depending on the type of underlying asset which collateralizes the financing.
−Removed: Accordingly, the portion of our portfolio which consists of floating interest rate assets are match-funded utilizing our expected sources of short-term financing, while our fixed interest rate assets are not match-funded.
During periods of rising interest rates, the borrowing costs associated with our investments tend to increase while the income earned on our fixed interest rate investments may remain substantially unchanged.
11 unchanged sentences
We generally calculate duration using various financial models and empirical data.
−Removed: Different models and methodologies can produce different duration numbers for the same securities.
+Added: Different models and methodologies can produce different duration values for the same securities.
The impact of changing interest rates on fair value can change significantly when interest rates change materially.
8 unchanged sentences
Changes in spreads impact our book value and our liquidity and could cause us to sell assets and to change our investment strategy in order to maintain liquidity and preserve book value.
−Removed: Uncertainties related to the COVID-19 pandemic caused credit spreads to widen significantly in the second half of March 2020.
+Added: Uncertainties related to the COVID-19 pandemic caused credit spreads to widen significantly in the second half of March 2020 and continuing into April 2020.
Unprecedented government responses, including fiscal stimulus, monetary policy actions, and various purchase and financing programs have had and will continue to impact credit spreads.
4 unchanged sentences
In general, an increase in prepayment rates will accelerate the accretion of purchase discounts, thereby increasing the interest income earned on the investments.
−Removed: Historically low interest rates, high interest rate volatility, uncertainties related to government polices on mortgage finance in response to the COVID-19 pandemic, social distancing, and other factors have made it more difficult to predict prepayment levels for the securities in our portfolio.
+Added: Historically low interest rates, high interest rate volatility, uncertainties related to government policies on mortgage finance in response to the COVID-19 pandemic, social distancing, and other factors have made it more difficult to predict prepayment levels for the securities in our portfolio.
As a result, it is possible that realized prepayment behavior will be materially different from our expectations.
11 unchanged sentences
Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease;
−Removed: conversely, in a decreasing interest rate environment, the estimated fair value of these securities would be expected to increase.
+Added: conversely, in a falling interest rate environment, the estimated fair value of these securities would be expected to increase.
The COVID-19 pandemic and related preventative measures have caused unprecedented volatility and illiquidity in fixed income markets.
1 unchanged sentence
As a result, if these market conditions persist, margin call risk remains elevated and our operating results and financial condition may be materially impacted.
−Removed: The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, including net interest paid or received under interest rate swaps, at March 31, 2020, assuming a static portfolio and constant financing and credit spreads.
+Added: The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, including net interest paid or received under interest rate swaps, at June 30, 2020, assuming a static portfolio and constant financing and credit spreads.
When evaluating the impact of changes in interest rates, prepayment assumptions and
9 unchanged sentences
Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes.
−Removed: The base interest rate scenario assumes interest rates at March 31, 2020.
+Added: The base interest rate scenario assumes interest rates at June 30, 2020.
Furthermore, while we generally expect to retain such assets and the associated interest rate risk to maturity, future purchases and sales of assets could materially change our interest rate risk profile.
1 unchanged sentence
Treasury yields.
−Removed: Given the relatively low interest rates at March 31, 2020, to be consistent, we also applied a floor of 0% for all related funding costs.
+Added: Given the relatively low interest rates at June 30, 2020, to be consistent, we also applied a floor of 0% for all related funding costs.
Due to this floor, we anticipate that declines in funding costs resulting from a significant interest rate decrease would be limited.
23 unchanged sentences
Further, in light of the COVID-19 pandemic’s impact on the overall economy, such as rising unemployment levels or changes in consumer behavior related to loans as well as government policies and pronouncements, borrowers may experience difficulties meeting their obligations or seek to forbear or further forbear payment on or refinance their mortgage loans to avail themselves of lower rates.
−Removed: In addition to residential mortgage-related assets, the adverse economic conditions could negatively impact tenants on our commercial property assets resulting in potential delinquencies, defaults or declines in asset values.
+Added: In addition to residential mortgage-related assets, the adverse economic conditions could negatively impact tenants underlying our commercial property assets resulting in potential delinquencies, defaults or declines in asset values.
In many instances, tenants are foregoing rent payments or seeking forbearance.
3 unchanged sentences
Foreign Exchange Rate Risk
−Removed: We have an investment of €14.1 million in an unconsolidated joint venture whose net assets and results of operations are exposed to foreign currency translation risk when translated in U.S.
+Added: We have an investmen t of €12.8 million in an unconsolidated joint venture whose net assets and results of operations are exposed to foreign currency translation risk when trans lated in U.S.
dollars upon consolidation.
9 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.