American Capital Agency's Mid-Q1 2014 Composition And Valuation Analysis - Part 2

Mar. 4.14 | About: American Capital (AGNC)

Author's Note: PART 2 of this article is a continuation from PART 1, which was discussed in a previous publication. Please see PART 1 of this article for a composition and valuation analysis of American Capital Agency Corp.'s (NASDAQ:AGNC) MBS portfolio. PART 1 helps lead to a better understanding of the topics and analysis that will be discussed in PART 2. The link to PART 1's analysis is provided below:

American Capital Agency's Mid-Q1 2014 Composition And Valuation Analysis - Part 1

This three-part article is a very detailed look at AGNC's MBS and derivative portfolios. I perform this detailed analysis for readers who anticipate/want such an analysis performed each quarter. For readers who just want the summarized conclusions/results, I would suggest to scroll down to the "Conclusions Drawn" section at the bottom of the each part of the article.

Focus of PART 2 of Article:

The focus of PART 2 of this article is to provide a mid-first quarter of 2014 update on AGNC regarding the company's derivative portfolio. I feel this mid-quarter update will provide readers a general direction on how the first-half of the first quarter of 2014 has panned out regarding AGNC's derivative strategy. PART 2 of this article will mainly compare and contrast what has occurred so far in the first quarter of 2014 versus the fourth quarter of 2013 by analyzing the composition of AGNC's derivative portfolio as of 12/31/2013. This will also help readers understand how the second-half of the current quarter could pan out as interest rates fluctuate.

I would like to first analyze AGNC's derivative portfolio as of 12/31/2013 and identify the changes the company made in the prior quarter, which will impact the current quarter. The information derived in PART 2 of this analysis will assist in projecting a valuation for AGNC's derivative portfolio through the week ending 2/14/2014 (which will be determined in PART 3).

B) AGNC's Derivative Portfolio - Composition and Valuation Analysis:

Let us first understand the composition of AGNC's derivative portfolio as of 12/31/2013. This will include a net change analysis when comparing AGNC's 12/31/2013 balance versus the company's 9/30/2013 balance. This will be followed by a derivative portfolio composition analysis for the first-half of the first quarter of 2014 broken down by the four main derivative sub-accounts currently being used by AGNC.

Side Note: To better illustrate the nature and function of AGNC's derivative portfolio, I show each derivative sub-account as being net "long" or short." All net long positions have a "direct" relationship with AGNC's MBS portfolio regarding valuation movements. As such, if AGNC's MBS portfolio has a valuation gain during a specified time period, AGNC's net long derivative position(s) will generally have a similar valuation gain (and vice versa). All (short) positions have an "inverse" relationship with AGNC's MBS portfolio regarding valuation movements. As such, if AGNC's MBS portfolio has a valuation gain during a specified time period, AGNC's net (short) derivative position(s) will likely have an offsetting valuation loss (and vice versa). This can be confusing for some readers, but I feel presenting the information this way is the most effective when trying to truly show the nature of AGNC's derivative sub-accounts. If a particular reader ever becomes confused while reading this article, I would suggest referring back to this side note to gain one's bearings.

It should also be noted not all of AGNC's derivative sub-accounts are held for the sole purpose of mitigating a valuation loss on the company's MBS portfolio. AGNC holds different types of derivative instruments for different purposes. For example, AGNC has hedging instruments in place (interest rate swaps and swaptions) which help offset both a valuation loss on the company's MBS portfolio and the potential rising interest expense on repurchase ("repo") loans. Other derivative instruments [U.S. Treasury securities, "to-be-announced" ("TBA") MBS, and forward settling MBS] can have varying uses depending on whether each derivative sub-account is net long (short). AGNC's U.S. Treasury securities, TBA MBS, and forward settling MBS typically have a direct relationship to the company's MBS portfolio when a net long position exists (non-hedging position). However, when these derivative sub-accounts are in a net (short) position, an inverse relationship is typically established and these instruments become hedges per se regarding valuation changes on AGNC's MBS portfolio.

1) AGNC's Derivative Portfolio - Composition Analysis (As of 12/31/2013; Including Net Change Analysis):

Table 7 below shows AGNC's derivative portfolio as of 12/31/2013. Table 7 displays the following columns (in order from left to right): 1) derivative and other hedging instruments; 2) long (short) notional amount as of 9/30/2013; 3) additions; 4) settlements, terminations, expirations, or exercises; 5) long (short) notional amount as of 12/31/2013; and finally 6) amount of gain (loss) recognized in income on derivatives.

Table 7 - AGNC Derivative Portfolio Quarterly Activity (Fourth Quarter of 2013)

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(Source: Table created entirely by myself, partially using data obtained from AGNC's SEC filed Form 10-K; Annual Report for 2013)

Table 7 above shows each derivative instrument's activity during the fourth quarter of 2013. Using Table 7 as a reference, let us first discuss how the composition of AGNC's derivative portfolio as of 12/31/2013 compared to the company's derivative portfolio as of 9/30/2013. This will enable us to better understand what changes were made during the fourth quarter of 2013. This will ultimately help us when performing a mid-first quarter of 2014 valuation analysis on AGNC's derivative portfolio (which will be determined in PART 3). Due to immateriality, the following derivative sub-accounts will only be shown in Table 7 above and Table 8 below and not be discussed within this article: 1) TBA put option; 2) REIT equity securities; 3) interest-only and principal-only strips; and 4) consolidated variable interest entities ("VIE").

To better understand how AGNC's derivative portfolio as of 12/31/2013 changed when compared to the company's derivative portfolio as of 9/30/2013, Table 8 is shown below. Table 8 shows each derivative instrument's net long (short) change for the fourth quarter of 2013 when compared to the third quarter of 2013. As such, Table 8 below provides key information on some recent quarterly net changes to the following four main sub-accounts within AGNC's derivative portfolio: 1) TBA MBS and forward settling MBS; 2) interest rate swaps; 3) interest rate swaptions; and 4) U.S. Treasury securities (which includes three secondary sub-accounts).

Table 8 - AGNC Derivative Portfolio Quarterly Net Changes (12/31/2013 versus 9/30/2013)

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(Source: Table created entirely by myself, including all calculated figures)

Using both Table 7 and Table 8 above as a general reference, let us begin our composition analysis for the four main sub-accounts that make up AGNC's derivative portfolio as of 12/31/2013.

a) TBA MBS and Forward Settling MBS (Net Long Position as of 12/31/2013):

Using Table 7 above as a reference, AGNC had a net long (short) TBA MBS and forward settling MBS position of $2.1 billion as of 12/31/2013. For readers unfamiliar with AGNC's TBA MBS portfolio, I provided a detailed overview of this derivative sub-account in a previous article.

The link to the prior article's TBA MBS and forward settling MBS overview is provided below:

American Capital Agency's Mid-Q4 2013 Composition And Valuation Analysis - Part 2

Using Table 7 and Table 8 above as a reference, AGNC reversed the company's net (short) TBA MBS and forward settling MBS position during the fourth quarter of 2013. The quarterly net change for this specific derivative sub-account was a net long increase of $9.4 billion during the fourth quarter of 2013. As such, AGNC went from a net long (short) TBA MBS and forward settling MBS position of ($7.3) billion as of 9/30/2013 to a net long (short) TBA MBS and forward settling MBS position of $2.1 billion as of 12/31/2013.

However, to truly understand what management's strategy was within this derivative sub-account, let us further analyze which TBA MBS maturities and coupons changed between 9/30/2013 and 12/31/2013. For this detailed analysis, Table 9 is provided below.

Table 9 - AGNC TBA MBS and Forward Settling MBS Quarterly Net Changes (12/31/2013 versus 9/30/2013)

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(Source: Table created entirely by myself, including all calculated figures)

Using Table 9 above as a reference, the quarterly net notional ("par") change within AGNC's 15-year 2.5% coupon TBA MBS was ($2.3) billion. This was due to the fact AGNC continued to realign the company's MBS portfolio into higher coupon holdings. As of 9/30/2013, AGNC had a net long (short) TBA MBS position of $1.2 billion. As of 12/31/2013, AGNC had a net long (short) TBA MBS position of ($1.2) billion. Since the 15-year 2.5% coupon MBS is generally more price sensitive when compared to the 15-year higher-coupon MBS in a rising interest rate environment, AGNC increased the company's net (short) position within this particular coupon.

Immaterial quarterly net notional ("par") changes occurred within the 15-year 3.0%, 3.5%, and 4.0% coupon TBA MBS. Since the 15-year higher-coupon MBS are generally less price sensitive to price movements when compared to 15-year lower-coupon MBS in a rising interest rate environment, the TBA MBS strategy performed by AGNC's management make sense.

As a whole, management increased AGNC's 15-year net (short) TBA MBS position by ($2.2) billion during the fourth quarter of 2013. Furthermore, the weighted average coupon ("WAC") of the 15-year net (short) TBA MBS position was only 2.92%. This makes sense because AGNC is trying to sell-off the company's lower-coupons while rebalancing the MBS portfolio into higher-coupons.

Turning to the 30-year TBA MBS maturities, AGNC's increased the company's 3.0%, 3.5%, 4:0%, and 4.5% coupons. The quarterly net notional ("par") change within AGNC's 30-year 3.0%, 3.5%, 4.0%, and 4.5% coupon TBA MBS was $3.8 billion, $5.9 billion, $0.9 billion, and $1.1 billion, respectively. As stated in PART 1 of this article, during the fourth quarter of 2013 AGNC maintained the company's proportion of 15 and 30-year fixed-rate agency holdings while continuing to re-roll the MBS portfolio into higher coupons within the same maturities.

As of 9/30/2013, AGNC had a net long (short) position of ($3.7) billion on the company's 30-year 3.0% coupon TBA MBS, ($5.3) billion on the company's 30-year 3.5% coupon TBA MBS, $3.3 billion on the company's 30-year 4.0% coupon TBA MBS, and $0.3 billion on the company's 30-year 4.5% coupon MBS. As of 12/31/2013, AGNC had a net long (short) position of $0.1 billion on the company's 30-year 3.0% coupon TBA MBS, $0.6 billion on the company's 30-year 3.5% coupon TBA MBS, $4.1 billion on the company's 30-year 4.0% coupon TBA MBS, and $1.4 billion on the company's 30-year 4.5% coupon MBS. As such, AGNC will be taking delivery on a material portion of 30-year 4.0% coupon TBA MBS during the first quarter of 2014.

Therefore, during the fourth quarter of 2013, AGNC reversed the company's TBA MBS and forward settling MBS strategy from a net long (short) position of ($7.4) billion as of 9/30/2013 to a net long (short) position of $2.1 billion as of 12/31/2013. Instead of using AGNC's TBA MBS and forward settling MBS position as a "hedging" instrument per se (net (short) position), management has now used the company's TBA MBS and forward settling MBS position as a slight extension of the balance sheet (net long position).

When AGNC has a net long TBA MBS and forward settling MBS position and mortgage interest rates/U.S. Treasury yields decrease, the company will generally record a net valuation gain, which will help offset an interest rate swap and swaption net valuation loss. Due to the mini "crisis" regarding emerging markets and the relatively weak U.S. economic data, mortgage interest rates/U.S. Treasury yields modestly decreased from levels seen at the end of 2013. During the week ending 2/7/2014, U.S. Treasury yields were between 25 - 35 bps lower when compared to yields as of 12/31/2013. Traditional 15 and 30-year fixed-rate mortgage interest rates were approximately 20 - 25 bps lower when compared to rates as of 12/31/2013. As such, AGNC most likely recorded a TBA MBS and forward settling MBS net valuation gain through the week ending 2/14/2014. As noted earlier, a detailed valuation of AGNC's TBA MBS and forward settling MBS through the week ending 2/14/2014 will be discussed in PART 3 of this analysis.

b) Interest Rate Swaps (Net (Short) Position as of 12/31/2013):

Using Table 7 above as a reference, AGNC had a net (short) interest rate swaps position of ($43.3) billion as of 12/31/2013. AGNC had ($4.1) billion of interest rate swap additions and $11.0 billion of interest rate swap expirations or terminations during the quarter. Using Table 7 and Table 8 above as a reference, AGNC continued to decrease the company's net (short) interest rate swaps position during the fourth quarter of 2013. The quarterly net notional balance change for this specific derivative sub-account was a net (short) reduction of $7.0 billion or 14% of AGNC's interest rate swaps net (short) position of ($50.2) billion as of 9/30/2013.

Table 8 above shows the quarterly net changes within this derivative sub-account as a whole during the fourth quarter of 2013. However, Table 8 does not break out the specific interest rate swap maturities. To obtain further information regarding the quarterly net changes to AGNC's interest rate swaps, Table 10 is provided below.

Table 10 - AGNC Interest Rate Swaps Quarterly Net Changes (12/31/2013 versus 9/30/2013)

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(Source: Table created entirely by myself, including all calculated figures and percentages)

Using Table 10 above as a reference, the quarterly net notional change within AGNC's interest rate swaps with maturities of less than three years, three to five years, and seven to ten years was a decrease in the company's net (short) position of $1.3 billion, $3.3 billion, and $1.6 billion, respectively. The rest of the maturity groupings had minor (short) position changes. AGNC continued to decrease the company's interest rate swaps net (short) position during the fourth quarter of 2013 for two main reasons.

First, as discussed in PART 1 of this article, AGNC reduced the company's MBS portfolio by ($19.1) billion during the fourth quarter of 2013. When calculated, this was a reduction of 22% of the company's MBS portfolio. Due to the smaller MBS portfolio, management felt a smaller net (short) interest rate swaps position was appropriate.

Second, management felt the risks associated with the fixed-rate agency MBS market began to dissipate during the fourth quarter of 2013. AGNC felt the extension risk in the company's MBS portfolio materially decreased due to the rebalancing efforts during the third and fourth quarters of 2013. AGNC materially increased the proportion of the company's less price sensitive 15-year fixed-rate agency MBS versus the more price sensitive 30-year fixed-rate agency MBS. As such, AGNC's duration gap increased from 0.9 years as of 9/30/2013 to 1.5 years as of 12/31/2013. Therefore, management felt the continued extremely high ratio of interest rate swaps versus MBS holdings/repo loans was unwarranted.

It should be noted that adding to AGNC's net (short) interest rate swaps position in a rising interest rate environment comes at an added cost regarding a modestly higher average fixed pay rate on all newly created interest rate swaps (disregards the notion of interest rate swaptions for simplicity). This is evidenced in Table 10 above under the "average fixed pay rate" column. This column represents the quarterly net change in AGNC's average fixed pay rate that the company pays to a counterparty in a specific interest rate swap. Therefore, if management feels the company can operate at a higher net duration gap, this will directly benefit AGNC's "net periodic interest costs of interest rate swaps" expense. Since AGNC lowered the company's notional net (short) position by 14% between 9/30/2013 and 12/31/2013, this particular expense modestly decreased during the fourth quarter of 2013. This particular expense should remain relatively unchanged during the first quarter of 2014. As noted earlier, the valuation of AGNC's interest rate swaps through the week ending 2/14/2014 will be discussed in PART 3 of this analysis.

c) Interest Rate Swaptions (Net (Short) Position as of 12/31/2013):

Interest rate swaptions are basically options to enter into underlying interest rate swap contracts. Whereas interest rate swap contracts have no initial "up-front" costs (gains and losses are incurred as interest rates fluctuate over the life of the swaps), interest rate swaptions have implicit upfront costs (similar to an option contract; generally speaking).

Using Table 7 above as a reference, AGNC had a net (short) interest rate swaptions position of ($14.3) billion as of 12/31/2013 (based on the notional balance of the underlying interest rate swaps). AGNC had no interest rate swaption additions and $6.0 billion of interest rate swaption exercises, expirations, or terminations during the quarter. Using Table 7 and Table 8 above as a reference, AGNC continued to decrease the company's net (short) interest rate swaptions position during the fourth quarter of 2013. The quarterly net notional balance change for this specific derivative sub-account was a net (short) reduction of $6.0 billion or 29% of AGNC's interest rate swaptions net (short) position of ($20.2) billion as of 9/30/2013.

Table 8 above shows the quarterly net changes within this derivative sub-account as a whole during the fourth quarter of 2013. However, Table 8 does not break out the specific interest rate swaption expirations or underlying interest rate swap maturities. To obtain further information regarding the quarterly net changes to AGNC's interest rate swaptions, Table 11 is provided below.

Table 11 - AGNC Interest Rate Swaptions Quarterly Net Changes (12/31/2013 versus 9/30/2013)

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(Source: Table created entirely by myself, including all calculated figures and percentages)

Using Table 11 above as a reference, the quarterly net notional balance change on the underlying interest rate swaps within AGNC's interest rate swaptions with expirations of one year or less and one to two years was a decrease in the company's net (short) position of $3.8 billion and $1.3 billion, respectively. The rest of the expiration groupings had minor (short) position changes. As was the case regarding the company's interest rate swaps, AGNC decreased the company's overall interest rate swaptions net (short) position for two main reasons. Please refer back to the discussion on AGNC's interest rate swaps for a discussion of these two main reasons.

It should be noted that adding to AGNC's net (short) interest rate swaptions position comes at an added cost. This is evidenced in Table 11 above under the "cost" column. This column represents the quarterly net change in AGNC's option costs in association with entering into a specific interest rate swaption contract. Since AGNC did not enter into any new interest rate swaption contracts while $6.0 billion were either exercised, expired, or terminated during the fourth quarter of 2013, the company had a reduced cost basis of ($90) million. As noted earlier, the valuation of AGNC's interest rate swaptions through the week ending 2/14/2014 will be discussed in PART 3 of this analysis.

d) U.S. Treasury Securities (Net Long Position as of 12/31/2013):

Using Table 7 above as a reference, AGNC had the following three derivative secondary sub-account positions as of 12/31/2013: 1) long U.S. Treasury securities of $3.9 billion; 2) (short) U.S. Treasury securities of ($2.0) billion; and 3) U.S. Treasury security futures sold (short) of ($1.9) billion. This is based on each secondary sub-account's face amount ("par"). Using Table 7 and Table 8 above as a reference, when combining all three secondary sub-accounts together, AGNC slightly decreased the company's net long U.S. Treasury securities position of $1.2 billion as of 9/30/2013 to $0.1 million as of 12/31/2013. As such, the quarterly net change for these three secondary sub-accounts (as a whole) was a net long decrease of ($1.2) billion during the fourth quarter of 2013.

Table 8 above shows the quarterly net changes within this derivative sub-account, broken down by the three secondary sub-accounts, during the fourth quarter of 2013. However, Table 8 does not break out the specific maturities within these three secondary sub-accounts. To obtain further information regarding the quarterly net changes to AGNC's U.S. Treasury securities, Table 12 is provided below.

Table 12 - AGNC U.S. Treasury Securities Quarterly Net Changes (12/31/2013 versus 9/30/2013)

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(Source: Table created entirely by myself, including all calculated figures)

Using Table 12 above as a reference, the quarterly net face amount change within AGNC's U.S. Treasury securities with maturities of five, seven, and ten years was an increase (decrease) in the company's net long position of $1.2 billion, ($1.2) billion, and ($1.1) billion, respectively. The quarterly net face amount change within AGNC's U.S. Treasury security futures sold (short) was an increase in the company's net (short) position of ($0.2) billion. As noted earlier, the valuation of AGNC's U.S. Treasury securities through the week ending 2/14/2014 will be discussed in PART 3 of this analysis.

Now that we understand the recent past and current composition of AGNC's derivative portfolio, let us briefly discuss American Capital Mortgage Investment Corp.'s (NASDAQ:MTGE) derivative portfolio as of 12/31/2013. This discussion will mainly compare and contrast AGNC's and MTGE's derivative portfolio as of 12/31/2013.

Brief Discussion of MTGE's Derivative Portfolio (As of 12/31/2013; Including Comparison to AGNC's Portfolio):

AGNC's and MTGE's derivative portfolio continued to be pretty similar as of 12/31/2013. One modest difference between AGNC's and MTGE's derivative portfolio was the composition of each company's TBA MBS and forward settling MBS positions as of 12/31/2013. AGNC held a net long (short) TBA MBS and forward settling MBS position of $2.1 billion as of 12/31/2013. Meanwhile, MTGE held a net long (short) TBA MBS and forward settling MBS position of ($0.8) billion as of 12/31/2013. When compared to several past quarters, this modest difference of TBA MBS and forward settling MBS positions is relatively small.

With that being said, let us now take a look at the rest of AGNC's and MTGE's derivative portfolio as of 12/31/2013 (also known as each company's hedging portfolio).

Table 13 - Derivative Portfolio Composition Summary (As of 12/31/2013; AGNC versus MTGE)

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(Source: Table created entirely by myself, partially using data obtained from AGNC's quarterly investor presentation slides and MTGE's quarterly investor presentation slides)

Using Table 12 above as a reference, AGNC and MTGE had a pretty similar hedging portfolio as of 12/31/2013 (proportionally speaking). AGNC had a hedging coverage ratio of 86% as of 12/31/2013. When compared to 9/30/2013, this equates to a continued slight decrease in AGNC's hedging coverage ratio. This article already discussed several reasons why AGNC had a decreased hedging coverage ratio. In comparison, MTGE had a hedging coverage ratio of 77% as of 12/31/2013. When compared to 9/30/2013, this equates to an unchanged hedging coverage ratio.

As the percentages indicate, MTGE had a less hedged portfolio as of 12/31/2013 when compared to AGNC. This makes sense because MTGE recently completed the acquisition of Residential Credit Solutions ("RCS"), a fully-licensed mortgage servicer also known as a "mortgage servicing rights" ("MSR") company. The acquisition of RCS should act as a natural hedge per se against the interest rate risk and spread risk that is a part of any company's fixed-rate MBS portfolio.

Still using Table 12 as a reference, AGNC and MTGE had a hedging portfolio that had a similar weighted average term/maturity and weighted average duration (estimate of interest rate sensitivity in years). AGNC's hedging portfolio had a weighted average term/maturity of 5.0 years as of 12/31/2013. In comparison, MTGE's hedging portfolio had a weighted average term/maturity of 5.7 years as of 12/31/2013. This was a pretty close resemblance. AGNC's hedging portfolio had a weighted average duration of (3.2) years as of 12/31/2013. In comparison, MTGE's hedging portfolio had a weighted average duration of (3.1) years as of 12/31/2013. The difference between AGNC's and MTGE's weighted average duration of 0.1 years is minimal. As such, a similar hedging net valuation gain (loss) should occur between the two companies during the first quarter of 2014. The valuation of MTGE's derivative portfolio through the week ending 2/14/2014 will be discussed in PART 3 of this analysis.

Conclusions Drawn (PART 2):

By examining AGNC's derivative portfolio as of 12/31/2013, I have shown how and analyzed why management has continued to change the composition of the company's derivative portfolio. This determination was mainly shown in Tables 7 and 8 above. These two tables showed the quarterly compositional changes within AGNC's derivative portfolio during the fourth quarter of 2013.

AGNC increased the company's net long TBA MBS and forward settling MBS position by $9.4 billion during the fourth quarter of 2013. As such, AGNC went from a net long (short) TBA MBS and forward settling MBS position of ($7.3) billion as of 9/30/2013 to a net long (short) TBA MBS and forward settling MBS position of $2.1 billion as of 12/31/2013. Instead of using AGNC's TBA MBS and forward settling MBS position as a "hedging" instrument per se, management has now used the company's TBA MBS and forward settling MBS position as a slight extension of the balance sheet.

The remainder of AGNC's derivative portfolio (also known as the hedging portfolio), which includes the company's interest rate swaps, interest rate swaptions, and U.S. Treasury securities, had a hedging coverage ratio of 86% as of 12/31/2013. When compared to 9/30/2013, this equates to a continued slight decrease in AGNC's hedging coverage ratio. One could argue this was still a relatively high hedging coverage ratio. The continued high hedging coverage ratio is for the preservation of BV in case mortgage interest rates/U.S. Treasury yields once again materially increase over a relatively short period of time. The slight decrease in AGNC's hedging coverage ratio is due to management believing the extension risk in the company's MBS portfolio materially decreased due to the rebalancing efforts taken during the third and fourth quarters of 2013. AGNC materially increased the proportion of the company's less price sensitive 15-year fixed-rate agency MBS versus the more price sensitive 30-year fixed-rate agency MBS. As such, AGNC's net duration gap increased from 0.9 years as of 9/30/2013 to 1.5 years as of 12/31/2013. Therefore, management felt the continued extremely high ratio of interest rate swaps, interest rate swaptions, and net (short) U.S. Treasury securities versus MBS holdings/repo loans was unwarranted. The reduced hedging coverage ratio should prove beneficial to AGNC as mortgage interest rates/U.S. Treasury yields have materially decreased during the first-half of the first quarter of 2014.

Final Note: The article above is PART 2 of a three-part series. As such, the conclusions drawn from PART 2 are "partial" in nature. PART 3 of this article will be a continuation of PART 1 and PART 2. PART 3 will discuss the valuation of AGNC's derivative portfolio through the week ending 2/14/2014. PART 3 will also include a projected BV per share amount as of 2/14/2014, 2/21/2014, 2/28/2014, and 3/7/2014.

Disclosure: I am long AGNC, MTGE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.