AGNC’s Book Value Rebound Ended

The Tip Desk · October 20, 2026 · 3 min read

The mortgage-backed securities investor’s tangible book value fell 16.9% to $7.13 a share in the third quarter.

AGNC Investment Corp. (AGNC), the mortgage-backed securities investor, swung back to a negative economic return in the third quarter, reversing its second-quarter recovery. Its return on tangible common equity was negative 12.7%, after a 6.7% gain in the second quarter and a negative 1.6% return in the first. Dividends again failed to offset the decline in book value.

Chief Executive Peter Federico said sharply higher interest rates and a spike in volatility, particularly in late September, pressured fixed-income markets. Treasury market instability drove weakness in Agency mortgage-backed securities, which he said were the worst-performing sector of the Bloomberg U.S. Aggregate Bond Index during the quarter. That reversed the second quarter’s backdrop, when the company said favorable supply-demand conditions had supported Agency mortgage-backed securities performance and driven spreads to benchmark rates tighter.

Tangible net book value ended September at $7.13 a share, against $8.58 at June’s close. AGNC reported a comprehensive loss of $1.28 a share, including a net loss of $1.17 a share. The results captured investment valuation losses that its separate measure of net spread and dollar roll income excluded.

Unrealized losses on investment securities measured through net income totaled $5.015 billion. Gains of $2.052 billion on interest rate swaps and $1.228 billion on U.S. Treasury positions partially offset those losses. The resulting loss in the company’s other gain and loss category was $1.731 billion, illustrating the scale of the valuation hit despite gains on hedges.

The reversal in investment returns came alongside a continuing decline in net spread and dollar roll income. That non-GAAP measure fell sequentially to $0.37 a share, following $0.40 in the second quarter and $0.42 in the first. The latest result left a narrow margin over the quarter’s declared common dividend of $0.36 a share. It excluded gains and losses on investment valuations and certain premium amortization adjustments.

Funding costs also moved higher. The combined weighted average cost of funds, including interest rate swaps, rose to 3.09% from 2.89% in the second quarter. Average asset yield, including to-be-announced mortgage securities and excluding catch-up premium amortization, was 4.95%. On that same adjusted basis, the annualized net interest spread was 1.86%.

Prepayments provided a separate adjustment to reported investment income. Actual portfolio constant prepayments ran at an annualized rate of 8.2% during the quarter, while the projected remaining-life rate was 6.7% at September’s close. Changes in projected prepayments produced a $66 million catch-up premium amortization benefit, equivalent to $0.05 a share, which AGNC excluded from net spread and dollar roll income.

The investment portfolio totaled $94.4 billion at quarter-end. Agency mortgage-backed securities accounted for $91.4 billion, net forward purchases in the to-be-announced market represented $2.4 billion, and credit risk transfer securities and other mortgage credit investments totaled $0.6 billion. Thirty-year fixed-rate Agency mortgage securities and forward positions represented 94% of the portfolio.

AGNC increased hedge coverage of its funding liabilities to 90% from 73% at June’s close. Quarter-end tangible book value at-risk leverage stood at 7.9 times. Unencumbered cash and Agency mortgage securities totaled $6.3 billion, providing a pool of assets outside the securities pledged to support financing.

The company also raised $992 million through common stock offerings, against $167 million in the second quarter. Chief Financial Officer Bernice Bell said inclusion in the S&P MidCap 400 Index and subsequent rebalancing drove elevated trading volume. AGNC used that liquidity to issue shares at a significant premium to tangible net book value, she said.

Federico said the outlook for Agency mortgage securities was constructive once Treasury volatility subsides. He cited more attractive valuations, reduced prepayment risk and balanced supply and demand. His assessment made calmer Treasury trading a condition of the company’s outlook after the quarter’s reversal.