Annaly Capital Management: Navigating Volatility and Delivering Strong Returns

Annaly Capital Management, Inc. (NLY) has announced the dates for its fourth quarter 2024 financial results and conference call, scheduled for January 29 and 30, 2025, respectively. As the company prepares to share its latest performance, let's take a look at its strategic portfolio management, hedging strategy, and financial performance in 2024.



Strategic Portfolio Management
Annaly's strategic portfolio management has been a key driver of its financial performance in 2024. The company's active management of its agency portfolio allowed it to tactically reduce its agency holdings when current coupon nominal spreads widened. This strategic move enabled Annaly to mitigate potential risks and preserve capital. As market conditions improved, the company gradually added exposure back to its agency portfolio, positioning itself for growth opportunities.

This strategic approach has contributed to Annaly's strong performance, with a 1% economic return in the second quarter and a 5.7% return for the first half of the year. By actively managing its agency portfolio, Annaly has demonstrated its ability to navigate market challenges and deliver robust returns to shareholders.

Hedging Strategy
Annaly's hedging strategy has been instrumental in mitigating risks in a volatile interest rate environment. The company's management team has emphasized the importance of balancing risk and opportunity in their hedging strategies. During the second quarter of 2024, Annaly tactically reduced its agency holdings in response to current coupon nominal spreads widening, and then gradually added exposure back as market conditions improved. This strategic approach demonstrates Annaly's agility and adaptability in navigating market fluctuations, positioning the company for potential growth opportunities while managing risks effectively.

Financial Performance
Annaly's financial performance in 2024 has been marked by a strong return of 1% in the second quarter and a 5.7% return for the first half of the year. Despite a volatile interest rate environment, with the 10-year Treasury yield experiencing a 50-basis point range due to economic data fluctuations, Annaly has maintained a prudent leverage position and enhanced its liquidity and financing capacity. As of the second quarter of 2024, the company's economic leverage stood at 5.7x, down from 6.0x in the prior quarter. This responsible leverage profile has enabled Annaly to maintain a strong financial position and capitalize on market opportunities.

Conclusion
Annaly Capital Management's strategic portfolio management, hedging strategy, and financial performance in 2024 highlight the company's ability to navigate market challenges and deliver strong returns to shareholders. By actively managing its agency portfolio, maintaining a prudent leverage position, and focusing on risk management, Annaly has been able to navigate market fluctuations and position itself for future growth opportunities. As the company prepares to share its fourth quarter 2024 financial results, investors can look forward to a continued focus on strategic portfolio management and risk mitigation.