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- **Record Returns**: 8.1% Q3 economic return and 11.5% YTD, driven by Agency MBS spread tightening and Residential Credit growth.
- **Capital Deployment**: $1 billion capital raise and first preferred issuance since 2019 support diversified portfolio expansion.
- **Resilient Businesses**: MSR portfolio stability (sub-5 CPR), Residential Credit leadership (8% non-QM market share), and Agency MBS technical strength (50% fund inflow growth).
- **Efficiency & Liquidity**: Lowest OpEx-to-equity ratio in sector (1.31%) and $8.8 billion unencumbered assets provide flexibility for future growth.

**【CEO Summary Section】**
- Annaly achieved an 8.1% quarterly economic return and 11.5% year-to-date return, marking 8 consecutive quarters of positive returns.
- Agency MBS portfolio grew to $87 billion in market value, driven by lower interest rate volatility and improved technicals (e.g., 50% higher fixed income fund inflows).
- Residential Credit business expanded to $6.9 billion in market value, with Onslow Bay platform generating $473 million in retained securities through 8 transactions.
- MSR portfolio increased to $3.5 billion, benefiting from stable cash flows (sub-5 CPR) and new partnerships like PennyMac.
- Capital raise of $1 billion (including $800 million via ATM program) and first preferred issuance since 2019.

**【CFO Financial Commentary】**
- Book value per share increased 4.3% to $19.25, with EAD of $0.73 per share exceeding dividend payout.
- Net interest spread ex-PAA improved to 1.5%, driven by MSR and Residential Credit growth.
- Operating expense ratio (OpEx-to-equity) of 1.31% remained among the lowest in the sector.
- Liquidity enhanced with $8.8 billion in unencumbered assets, including $5.9 billion in Agency MBS and $1.5 billion in MSR advances.

**【Q&A Key Highlights】**
- **Agency MBS Strategy**: Tighter spreads (8-12bps) and lower volatility supported returns; portfolio biased toward intermediate coupons and specified pools to mitigate prepayment risk.
- **MSR Supply**: Bulk purchases of $17 billion in UPB during Q3, with subsequent $9 billion pipeline; new PennyMac partnership added $12 billion in low note rate MSR.
- **Residential Credit Outlook**: Non-QM market share at 8% of locks (vs. 2-3% in 2023), with 2025 issuance on track for $65-70 billion vs. $47 billion in 2024.
- **Fed Policy Risks**: Neutral rate expectations vs. Fed's 50bps above neutral; cautious on duration gap but open to convexity trades in low-volatility environment.
- **GSE Participation**: Limited current impact, but potential long-term stabilizer of spreads if regulatory reforms allow broader GSE participation.

Annaly Capital Management, Inc. (NLY) Q3 2025 Earnings Call Transcript

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