Annaly Capital's Q2 2025: Key Contradictions in Leverage Management, GSE Reform, and Dividend Stability

Management of leverage and rate exposure, impact of GSE reform on private credit markets, dividend stability and coverage, agency MBS demand and supply dynamics, leverage and volatility management are the key contradictions discussed in Annaly Capital Management's latest 2025Q2 earnings call.



Economic Performance and Dividend:
- Annaly Capital Management reported a positive economic return of 0.7% for Q2, while generating earnings available for distribution of $0.73, outearning their dividend for the seventh consecutive quarter.
- The strong performance was driven by diversification across three housing finance strategies and favorable market conditions.

Agency MBS Portfolio and Purchases:
- The agency MBS portfolio grew to nearly $80 billion in market value, up 6% quarter-over-quarter.
- The increase was due to the stabilization of market conditions, with rates range-bound and yields favorable for purchases of Agency MBS.

Residential Credit Expansion:
- Onslow Bay platform saw $3.6 billion in securitizations, with over $5.3 billion in locks and $3.7 billion in loans funded in Q2.
- This expansion was supported by tightening credit standards and stable housing market conditions, despite headwinds.

Macro Outlook and Fed Policy:
- The U.S. economy is expected to grow at 1.4% GDP for the second half of the year, supported by two anticipated Fed rate cuts.
- The Fed's stance was influenced by a resilient labor market and slowing inflation, particularly in services.