AGNC Reports Significant Loss Amid Fixed-Income Market Pressure

AGNC Investment Corp. reported a challenging third quarter as rising interest rates, increased market volatility and weakening mortgage-backed securities weighed on its financial performance.

For the quarter ended September 30, 2026, the mortgage real estate investment trust recorded a comprehensive loss of $1.28 per common share, comprising a net loss of $1.17 and an additional $0.11 loss from other comprehensive income related to investments marked to market through OCI.

Tangible net book value declined to $7.13 per common share from $8.58 at the end of June, representing a decrease of $1.45, or 16.9%. Despite the decline, AGNC declared dividends of $0.36 per common share for the quarter.

The combination of dividends and the reduction in tangible net book value resulted in a negative 12.7% economic return on tangible common equity.

President, Chief Executive Officer and Chief Investment Officer Peter Federico attributed the performance to significant pressure across fixed-income markets, particularly during the final weeks of September. Rising interest rates and increased volatility in the Treasury market contributed to pronounced weakness in Agency mortgage-backed securities (Agency MBS), which Federico said was the worst-performing sector of the Bloomberg U.S. Aggregate Bond Index during the quarter.

Net Interest Spread Narrows as Funding Costs Rise

AGNC generated net spread and dollar roll income of $0.37 per common share, excluding specified catch-up premium amortization effects. This compared with $0.40 per share in the previous quarter.

The company’s annualized net interest spread, including its to-be-announced mortgage securities position and interest rate swaps but excluding catch-up premium amortization, narrowed to 1.86% from 2.00% in the second quarter.

Funding costs increased during the period. AGNC’s combined weighted average cost of funds, including interest rate swaps, rose to 3.09% from 2.89%. The weighted average interest rate on repurchase agreements increased to 3.77% from 3.74%, while the implied financing cost of its to-be-announced position climbed to 3.64% from 3.46%.

The average asset yield on the investment portfolio, excluding the to-be-announced position, increased to 5.21% from 4.87%. However, excluding catch-up premium amortization, the average asset yield was 4.92%, compared with 4.89% in the prior quarter.

These figures indicate that higher asset yields did not prevent the company’s net interest spread from contracting as financing costs increased.

Portfolio Size, Leverage and Liquidity

AGNC reported an investment portfolio of $94.4 billion at September 30. This included $91.4 billion in Agency MBS, $2.4 billion in net forward purchases of Agency MBS through the to-be-announced market, and $0.6 billion in credit risk transfer securities, non-Agency securities and other mortgage credit investments.

The company’s tangible net book value at-risk leverage ratio increased to 7.9x from 7.4x at the end of June. Average at-risk leverage for the quarter was 7.6x.

AGNC held $6.3 billion in unencumbered cash and Agency MBS, excluding unencumbered credit risk transfer and non-Agency securities. This represented 57% of tangible equity at quarter-end.

The company also issued 97.6 million common shares through its at-the-market offering program, generating $992 million in net proceeds. Chief Financial Officer Bernice Bell said the company took advantage of elevated trading volumes following its addition to the S&P MidCap 400 Index to issue shares at a significant premium to tangible net book value per share.

Hedging Strategy Adjusts to Higher Rates

AGNC increased its hedging coverage as fixed-income market conditions deteriorated. Interest rate swaps, U.S. Treasury positions, option-based hedges and other interest rate hedges covered 90% of funding liabilities at quarter-end, compared with 73% at the end of June. Excluding option-based hedges, coverage reached 97%, up from 82%.

The company’s pay-fixed interest rate swap position totaled $74.6 billion in notional value, with an average fixed pay rate of 2.96% and an average floating receive rate of 3.90%. Its net short U.S. Treasury position increased to $11.1 billion, while receiver swaptions totaled $6.3 billion.

Management believes the outlook for Agency MBS could improve once Treasury market volatility subsides. Federico pointed to mortgage spreads approaching the upper end of their multiyear trading range, reduced prepayment risk at current interest rates and balanced supply-demand conditions as factors supporting a more constructive outlook.

What Investors Should Watch Next

Investors will be monitoring Treasury market volatility, mortgage spreads and AGNC’s ability to maintain its net interest spread as financing costs evolve. The performance of Agency MBS will remain central to book value, given the company’s substantial exposure to the asset class and its sensitivity to changes in interest rates.

The company’s elevated leverage and expanded hedging coverage will also be important considerations. While management sees potential for improved Agency MBS performance, the timing and magnitude of any recovery will depend on market stability and the direction of interest rates.