Cuộc họp công bố kết quả kinh doanh quý 3/2026 của Dynex Capital (DX): Giá trị sổ sách giảm khi ban lãnh đạo dự báo ROE đạt trên 20%

Điểm tin chính

• Giá trị sổ sách trên mỗi cổ phiếu phổ thông giảm 15,4% từ 12,90 USD xuống 10,91 USD, trong khi cổ tức cổ phiếu phổ thông 0,51 USD dẫn đến tổng lợi nhuận kinh tế âm 11,5%.
• Lỗ toàn diện là 1,49 USD trên mỗi cổ phiếu phổ thông, so với thu nhập toàn diện 0,80 USD trong quý 2.
• Dynex đã huy động được 384 triệu USD vốn thặng dư ròng, bao gồm 268 triệu USD vốn cổ phần phổ thông thông qua chương trình ATM và 116 triệu USD từ đợt phát hành cổ phiếu ưu đãi Dòng D.
• Chênh lệch lãi suất thuần kinh tế duy trì ổn định ở mức khoảng 1,18%, khi lợi suất tài sản tăng lên 5,00% và chi phí tài trợ thực tế tăng nhẹ lên 3,82%.
• Ban lãnh đạo cho biết chênh lệch giá Agency MBS mở rộng và độ lồi thế chấp được cải thiện hỗ trợ mức ROE mô hình tĩnh khoảng 20% đối với các khoản đầu tư mới có lãi suất danh nghĩa (coupon) thấp hơn và 25% đối với coupon hiện tại được phòng hộ bằng hợp đồng hoán đổi lãi suất.
• Thanh khoản cuối quý đạt 1,3 tỷ USD, tương đương hơn 42% tổng vốn cổ phần, trong khi đòn bẩy ở mức 9,0 lần vốn chủ sở hữu.

Dữ liệu tài chính chính

Kết quả kinh doanh và hoạt động

Lợi suất thế chấp coupon hiện tại đã tăng gần 100 điểm cơ bản trong quý. Lợi suất trái phiếu kho bạc kỳ hạn 10 năm tăng hơn 80 điểm cơ bản và vượt mức 5%, trong khi chênh lệch giá thế chấp mở rộng gần 20 điểm cơ bản. Ban lãnh đạo cho biết việc chênh lệch giá mở rộng chiếm hơn 80% tác động đến lợi nhuận của quý.

Dynex đã tăng cường các khoản phòng hộ khi lãi suất tăng và không giảm đòn bẩy. Công ty cho biết điều này giúp bảo toàn khả năng sinh lời của danh mục đầu tư và cho phép tiếp tục nắm giữ vị thế nhằm tận dụng khả năng chênh lệch giá thu hẹp trong tương lai. Độ nhạy chênh lệch giá theo mô hình của công ty đã tăng từ khoảng 4,6% vốn cổ phần phổ thông cho mỗi mức dịch chuyển 10 điểm cơ bản của chênh lệch giá vào ngày 30 tháng 6 lên khoảng 5,7% vào ngày 30 tháng 9.

Độ nhạy lãi suất theo mô hình của danh mục đầu tư cũng giảm xuống. Mô hình cho thấy mức tăng lãi suất tức thì 50 điểm cơ bản sẽ làm giảm vốn cổ phần phổ thông khoảng 0,5% vào cuối quý, so với mức 3,5% vào ngày 30 tháng 6. Ban lãnh đạo cho rằng sự cải thiện này đến từ thời lượng thế chấp ổn định hơn và rủi ro kéo dài thời hạn còn lại ở mức hạn chế.

Nguồn vốn tài trợ vẫn duy trì sẵn có trong suốt đợt biến động. Chênh lệch repo thế chấp so với SOFR giữ ở mức khoảng 12 đến 15 điểm cơ bản, và công ty báo cáo không có áp lực tài trợ đáng kể nào vào cuối quý.

Đợt phát hành cổ phiếu ưu đãi Dòng D đã làm tăng tỷ trọng vốn cổ phần ưu đãi từ khoảng 3% lên 7% tổng vốn cổ phần. Ban lãnh đạo mô tả đợt phát hành này mang lại thặng dư và cho biết vốn cổ phần ưu đãi có thể tiếp tục là một nguồn vốn mang tính cơ hội.

Định hướng của ban lãnh đạo

Ban lãnh đạo cho biết ROE mô hình tĩnh đối với các khoản đầu tư mới được phòng hộ bằng hợp đồng hoán đổi lãi suất đạt khoảng 20% đối với Agency MBS có coupon thấp hơn và 25% đối với coupon hiện tại. Trong phiên thảo luận với các nhà phân tích, công ty làm rõ rằng các ước tính này dựa trên mức đòn bẩy khoảng 10 lần, so với mức đòn bẩy thực tế cuối quý là 9,0 lần.

Dynex dự kiến tiếp tục tập trung vào việc duy trì tỷ lệ chi phí G&A quy năm ở mức khoảng 2% tổng vốn cổ phần. Ban lãnh đạo cũng cho biết việc mở rộng quy mô hơn nữa có thể tạo ra đòn bẩy hoạt động bổ sung.

Công ty bày tỏ sự tự tin vào khả năng chi trả cổ tức, viện dẫn quyết định không giảm đòn bẩy và việc bảo toàn được khả năng sinh lời của danh mục đầu tư. Công ty cũng báo cáo đã mua ròng tài sản sau khi kết thúc quý.

Rủi ro và các yếu tố cần theo dõi

• Lợi suất dài hạn tăng cao và chênh lệch giá Agency MBS mở rộng là nguyên nhân dẫn đến sự sụt giảm giá trị sổ sách trong quý.
• Ban lãnh đạo đã xác định nhu cầu vốn liên quan đến AI, tác động của giá hàng hóa, lạm phát, bất ổn địa chính trị và nhu cầu vay nợ gia tăng của chính phủ là các yếu tố tạo áp lực tăng lên lợi suất.
• Biến động lãi suất hàm ẩn ở mức cao tiếp tục đưa mức bù rủi ro đáng kể vào định giá thế chấp.
• Mức độ rủi ro chênh lệch giá gia tăng của Dynex tạo ra cơ hội tăng trưởng nếu chênh lệch giá thu hẹp, nhưng cũng khiến giá trị sổ sách nhạy cảm hơn nếu chênh lệch giá tiếp tục mở rộng. Công ty ước tính rằng việc chênh lệch giá thu hẹp 20 điểm cơ bản có thể làm tăng khoảng 11,5% giá trị sổ sách trong điều kiện các yếu tố khác không đổi.
• Việc công ty sẵn sàng duy trì mức đòn bẩy 9,0 lần phụ thuộc lớn vào khả năng tiếp tục tiếp cận các thị trường tài trợ repo quy mô lớn và có tính chống chịu cao.

Tóm tắt phiên Hỏi & Đáp với nhà phân tích

• Cập nhật giá trị sổ sách: Giá trị sổ sách ước tính tính đến thứ Sáu trước cuộc họp là 10,95 USD trên mỗi cổ phiếu, sau khi trừ cổ tức dồn tích.
• Đòn bẩy và thanh khoản: Ban lãnh đạo cho biết nguồn tài trợ repo dồi dào, số dư quỹ thị trường tiền tệ hơn 8 nghìn tỷ USD và khả năng tiếp cận đối tác rộng rãi đã củng cố sự tự tin của công ty đối với mức đòn bẩy hiện tại.
• Nhu cầu Agency MBS: Công ty đề cập đến khả năng mua vào từ các GSE, sự quan tâm của nhà đầu tư châu Âu và nước ngoài khác, cùng nhu cầu từ các quỹ REIT thế chấp là các yếu tố hỗ trợ. Ban lãnh đạo cũng cho biết nguồn cung hạn chế ở mức lãi suất hiện tại làm giảm lượng nhu cầu bổ sung cần thiết.
• Định vị danh mục đầu tư: Dynex đã từng bước tăng cường phòng hộ khi lãi suất tăng. Ban lãnh đạo đánh giá coupon từ 5,5% trở xuống là đặc biệt hấp dẫn do đặc tính thời lượng và độ lồi ổn định hơn.
• Vốn cổ phần ưu đãi: Ban lãnh đạo cho biết tỷ trọng cổ phần ưu đãi trong cơ cấu vốn còn dư địa tăng trên 7%, nhưng các đợt phát hành trong tương lai sẽ phụ thuộc vào chi phí, mức độ tăng trưởng lợi nhuận và các cơ hội đầu tư hiện có.
• Hướng đi của lãi suất: Công ty cho biết chiến lược của mình được thiết kế để thu chênh lệch giá thế chấp trên nhiều kịch bản lãi suất khác nhau thay vì phụ thuộc vào một hướng đi cụ thể của lãi suất.

Toàn văn biên bản cuộc họp kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, and welcome to the Dynex Capital, Inc. Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kaitlyn Mauritz, Head of Capital Markets and Investor Relations. Please go ahead.

Kaitlyn Mauritz

Thank you, operator, and thank you to everyone joining us today for Dynex's Third Quarter 2026 Earnings Conference Call. Joining me on today's conference call are Smriti Popenoe, Co-Chief Executive Officer and President; Byron Boston, Chairman and Co-Chief Executive Officer; Mike Sartori, Chief Financial Officer; and T.J. Connelly, Chief Investment Officer.

Before we begin, I'd like to remind you that today's discussion may include forward-looking statements. These statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and other factors that could cause actual results to differ materially. For additional information regarding these risks and factors, please refer to our filings with the SEC available on the Investors section of our website as well as on the SEC's website.

Dynex undertakes no obligation to update or revise any forward-looking statements. Our earnings press release was issued and filed with the SEC earlier today and is available on the Investors section of our website at dynexcapital.com as well as on the SEC's website. We may also reference our earnings presentation today, which is also available on our Investor page.

And with that, I'll turn the call over to Smriti for opening remarks.

Smriti L. Popenoe

Thank you, Kate. Good morning, everyone, and thank you for joining us today. This was a pivotal quarter in the markets, and Dynex was prepared for this moment. We had a strong liquidity position. Our experienced team maintained our position in our highest conviction trade, and we have retained the capacity to invest as spreads have moved wider.

In the third quarter, book value declined 15.4% to $10.91 per share for a total economic return of negative 11.4% (sic) [ 11.5% ]. Our portfolio operated as designed. The liquidity position absorbed the book value movement. Our financing remained deep and reliable and our hedging limited our downside as 10-year Treasury Yields rose above 5%. During the quarter, we took another step in the evolution of our capital structure with the issuance of our Series D preferred stock, our first preferred equity offering in more than 6 years. The transaction added an accretive source of permanent capital and further diversified our capital base.

The quarter's results reflect higher volatility and higher yields in the overall bond markets and wider spreads in the Agency MBS markets. These moves were driven by fundamental shifts in the macroeconomic system. The U.S. economy is in the midst of a significant positive investment cycle driven by AI and the infrastructure required to support it. During the third quarter, we experienced a simultaneous and significant risk and price rerating of several crucial factors related to AI investment.

The significant demand for capital in this sector, the price of that capital, the impact of that capital investment on the price of commodities and the follow-on impact of all of this on inflation are all higher, pushing yields up. At the same time, geopolitical uncertainty and rising government borrowing needs, both in the U.S. and globally, have reinforced upward pressure on yields. Against this backdrop, Agency MBS have actually been a sideshow, not the main act. And while flows were choppy and illiquid at times, the sector has not been the origin of market stress. In fact, the fundamentals and technicals behind Agency MBS are highly constructive. After the significant and rapid repricing, we find ourselves once again facing a highly attractive investment opportunity.

Absolute real yields are compelling. At current levels, mortgage spreads are still historically wide and provide significant compensation at a time when the value of the borrower's prepayment option is substantially lower. Refinancing incentive is extremely limited and much of the mortgage universe has already extended substantially. As a result, the duration and expected cash flows of these assets are more stable, and most importantly, the convexity profile of the mortgage market has improved dramatically. As a result, and as long-term investors in Agency MBS, we are being paid a wide spread while assuming considerably less cash flow uncertainty than is typically associated with mortgages. This combination underpins our confidence around strong forward returns.

Yes, the cost of capital has temporarily adjusted higher, but prospective returns have adjusted materially higher. This is an important moment for Dynex and our shareholders. We have been building a more scaled and resilient Dynex with the liquidity and flexibility to navigate market and operating shocks. As we grow, our investment platform becomes increasingly durable with greater capacity to deploy capital and opportunistically capture attractive returns.

I'd now like to turn the call over to Mike and T.J. to discuss our financial results and portfolio positioning in greater detail.

Michael Sartori

Thank you, Smriti. I'll now review our financial results for the third quarter. We reported book value per common share of $10.91 at September 30 compared with $12.90 at June 30. Including the $0.51 common dividend, total economic return was negative 11.5%. Comprehensive loss was $1.49 per common share compared with comprehensive income of $0.80 per share in the second quarter. We raised $384 million of accretive capital during the third quarter, net of fees, including $268 million of common equity through our ATM program while maintaining an opportunistic approach to capital raising.

We also completed our first preferred equity offering since 2020, raising $116 million of net proceeds in late September. The transaction was an important step in creating strategic flexibility in our capital structure. The offering increased preferred equity as a percentage of our capital stack from approximately 3% to 7% of our total equity base, diversifying our sources of capital as we continue to grow the business. The transaction was accretive and priced at an attractive cost of capital, particularly relative to the current yield on our common equity.

Importantly, funding markets remain deep and supportive. We maintained more than $24 billion of repo financing across over 25 counterparties. The breadth of our counterparty relationships, combined with the high quality and liquidity of our agency collateral provides substantial capacity to support additional investment opportunities. Asset yields increased from 4.9% to 5%, outpacing the modest increase in our effective financing cost from 3.79% to 3.82%.

As a result, our economic net interest spread remained stable at approximately 1.18%. Liquidity remains a key strength with $1.3 billion of cash and unencumbered securities at quarter end, representing over 42% of total equity, down approximately 9% from the prior quarter. As designed, liquidity levels have buffered the book value declines. Maintaining ample liquidity remains a core element of our risk management framework and allows us to capitalize on market opportunities as they arise. We ended the quarter with a $3.1 billion equity capital base, an increase of 24% year-to-date.

Turning to operating expenses. G&A for the third quarter was 2% of total equity on an annualized basis, consistent with the run rate we discussed last quarter. As we have grown, we have continued to generate meaningful operating leverage across the platform. G&A expenses have declined as a percentage of equity over time and was approximately 40% lower than the same period in 2025. As we execute on our business plan, we have continued to invest in talent, technology and infrastructure to support a larger, more scalable platform. We remain committed to expense discipline and focused on further enhancing operating efficiency as we scale.

With that, I'll turn it over to T.J. to discuss our portfolio and outlook in greater detail.

Terrence Connelly

Thanks, Mike. Current coupon mortgage yields moved nearly 100 basis points higher in the third quarter. The 10-year Treasury rose over 80 basis points, eclipsing 5% for the first time since 2007, and mortgage spreads widened nearly 20 basis points, much of it in the last 2 weeks of September. At quarter end, current coupon spreads to 7-year swaps were around 162 basis points, near the wide end of this year's range. We managed our portfolio actively and with discipline. As rates rose, we added to our hedges in lockstep. As a result, we limited the impact of the rate move.

Spread widening drove over 80% of the return in the quarter and our liquidity continued to do its job. It covered margin in the normal course of business, and we held our exposures and their return potential. We did not delever. As I turn to market dynamics, this quarter, I'm excited to announce the release of the Dynex Angle to accompany our earnings presentation. It gives you a deeper look into our market and macro perspectives. You can find it on our website under the Dynex Perspective heading.

I want to focus on what drove spreads wider, how orderly it was and why it leaves us with one of the most compelling risk profiles we've seen in this market. Realized rate volatility increased and implied volatilities in interest rate options markets jumped even more, causing cheapening of mortgages as expected. Floaters with interest rate caps were particularly exposed. Hedge funds were then forced to quickly exit or hedge their floater positions by selling Agency MBS. We also saw convexity selling from servicers and other mortgage hedgers as yields rose rapidly and durations extended.

Outside of the activity I just mentioned, the market functioned in an orderly fashion. Money managers continued buying Agency MBS into the wider spread, and that has continued into October. The GSEs also operated as we expected. As I said in July, they act as value-sensitive buyers, and there was anecdotal evidence of GSE buying in late September. They added just enough demand when spreads were wide to support a healthy mortgage market.

Funding markets remain very robust, and these conditions have continued in October with strong demand from money market funds intermediated well by the dealer community. Mortgage repo spreads to SOFR held near the tight of the last several years in the 12 to 15 basis point range. Moreover, for the first time in many years, quarter end came and went without any noticeable pressure. Looking ahead, we also see further structural support for financing from the expansion of central clearing and sponsored repo, potential changes to bank capital requirements and the Fed's standing liquidity facilities, all of which should contribute to the depth and resilience of funding markets over time.

Smriti described the improved mortgage convexity profile as an important part of today's opportunity. Let me put some numbers behind it and explain what it means for Dynex's portfolio today. Only about 1% of the outstanding mortgage universe has more than a 25 basis point refinance incentive and the vast majority of agency mortgages trade below par. The convexity selling that added to the push higher in yields has largely run its course, which means there's very little extension left even if rates move higher still.

You can see this in the interest rate sensitivity table at the top of Page 23 of our presentation, where the modeled impact of rate movements on book value is now much more limited. An instantaneous 50 basis point rise in rates as of September 30 is modeled to reduce common equity by only about 0.5% compared with 3.5% at June 30. That means our shareholders have the potential to capture the attractive carry I mentioned without relying on a particular path for interest rates.

Given this setup, we deliberately let our spread exposure grow. Our portfolio spread sensitivity increased from about 4.6% of common equity per 10 basis points of spread at June 30 to about 5.7% at quarter end. What this means is, if spreads tightened 20 basis points, which is roughly a retracement of the widening in the third quarter, you see the model shows approximately 11.5% of gains to book value, all else equal. Leverage ended the quarter at 9.0x shareholders' equity with the increase largely reflecting the decline in book value due to the spread widening and convexity. Our leverage reflects the opportunity set, the risk characteristics of the portfolio and the liquidity we want to maintain.

Our confidence in our current positioning is rooted in the market backdrop. The yield spread available, favorable supply and demand technicals, the convexity profile driven by more stable mortgage duration and a favorable financing environment. What matters is not simply that modeled ROEs are attractive. With more stable durations and less hedge rebalancing, the portfolio is positioned to retain more of the carry embedded in those returns. We believe we are being well compensated for the risk we are taking, which underscores our willingness to operate at the current level of leverage. We maintained our positions through the repricing, kept our financing and put new capital to work at wider spreads.

Today, we are earning attractive spreads on mortgages with more stable durations amid a funding market that remained resilient through the volatility. That is the opportunity in front of us, and we are positioned to capture it. At today's wider spreads, static ROEs on new investments hedged with interest rate swaps are around 20% in lower coupons and 25% in current coupons. And as you see in the interest rate sensitivity, a 10 bps spread tightening adds almost 6% of incremental return.

I'll now turn the call back over to Smriti for some closing remarks.

Smriti L. Popenoe

Thank you, T.J. Periodic repricing is a normal occurrence in the markets. And the mark-to-market impact of the third quarter's repricing is already reflected in our assets, our balance sheet, our book value and our share price. At this point, our focus, and we believe investors' focus should be on the 20-plus percent ROEs that the portfolio could generate in the future. We have a strong conviction in our ability to earn these forward returns. We continue to manage Dynex with a long-term shareholder perspective. That means staying disciplined through significant periods of repricing, managing risk while holding the positions where we have the greatest conviction and preserving our ability to invest as opportunities emerge.

Our focus extends beyond any single quarter. We are building Dynex to compound value across cycles with greater scale, a flexible capital structure and the capacity to invest when shareholders are well compensated for risk. As always, we remain invested alongside you in what we believe is a powerful long-term opportunity for our shareholders.

With that, I'd like to open up the call to questions.

Operator

[Operator Instructions] We'll take our first question from Doug Harter with U.S. Bancorp.

Phần hỏi đáp

Douglas Harter

T.J., I appreciate what you just said about kind of the risk of the market today and over kind of the longer term. Can you just talk about the risk positioning and the comfort with the ability to let leverage drift higher if markets continue to kind of be weak and spreads wider in the short term?

Terrence Connelly

Yes. Doug, One of the most important factors in the market that I discussed a little bit, maybe need to even further emphasize is the favorable financing environment. Over the last 2 to 3 years, we've seen money market balances grow by some 60%. $8 trillion sits in money market funds. And at the end of the day, that drives a lot of our ability to carry positions through volatility in markets. It's really notable that while realized volatility jumped in the third quarter, the big jump was in implied volatility.

There's a lot of macro risk priced into these mortgages. And we are able to continue to hold the financing through these periods of volatility. So at the end of the day, it's all about the financing market for us, and that has been an extremely healthy part of the market and gives us a lot of confidence in carrying the leverage that we're currently carrying.

Douglas Harter

Great. And then you talked about the ability to generate 20% to 20-plus percent returns. Can you just kind of walk through the math as to kind of how you're getting to that level of returns?

Terrence Connelly

Yes. That's a levered ROE that is based on our models and where we think -- where spreads are today and at the end of the third quarter, in particular. So we're getting on 5 through 6s around 20% static ROE and some of the higher coupons and 6.5s, for instance, are actually around 25% ROE based on the model. Leverage works out to be around 10% on that static ROE model.

Operator

[Operator Instructions] We'll move next to Bose George with KBW.

Bose George

Can we get an update on book value quarter to date?

Terrence Connelly

Yes, of course. As of Friday, our estimated book value net of the accrued dividend was $10.95.

Bose George

Okay. Great. And then on expenses, you noted the 2%. I mean just when I do the math, it looks like it was down a decent amount, like closer to maybe 1.5%. So is there anything unusual or seasonal in that? And then just like thinking about it going forward, I guess, 2% should be kind of the number we use.

Michael Sartori

Yes. Bose, that's right. As we indicated, G&A is down about 40% since last year at this time. We remain focused on that 2% ratio. As we continue to grow, we will see operating leverage benefits from this. At the end of the day, it's about performance and returns and what creates shareholder value. And what -- that decrease really comes from compensation expense. It's aligned with the company's performance and shareholder value.

Bose George

Okay.

Terrence Connelly

Bose, one of my colleagues mentioned I may have cut out just slightly, as I said, the book value, $10.95.

Bose George

$10.95, okay.

Operator

We go next to Marissa Lobo with UBS.

Ameeta Lobo Nelson

You characterized the current environment as a compelling forward opportunity. Could you speak to the demand side of that view, just where you see bank demand, GSE buying, foreign demand? And who do you see as the marginal buyer of Agency MBS at these spread levels?

Terrence Connelly

Importantly, as I mentioned, GSEs were very likely in the market in September. They have been a backstop bid to mortgages. And I think that's something we've been talking about for several quarters now ever since the January tweet and their active purchases in the first quarter. So that remains an important backdrop. What's really notable here is given the supply dynamics at these rate levels, you don't actually need all that much marginal demand. We have seen foreign buyers in Europe.

For instance, there was the news of the Norges Bank and the possibility that they'd be selling global sovereigns to buy agency mortgages, and they specifically mentioned U.S. agency mortgages. That's notable. I think that's a long-term flow that will underpin and really shows the quality of these assets, right? It's a yield that you can -- at these real yield levels is very compelling to the global investors. So I do expect foreign investors to be active in the -- on the demand side of the equation. Of course, the mortgage REIT community remains increasingly important to this.

Smriti L. Popenoe

Yes. Marissa, I'd also jump in and just talk about the view on forward returns being really solid here in the low to mid-20s. One of the other pieces to keep in mind is how we've been able to preserve our earnings power even when book value has declined. So one of the key decisions that we made over the quarter was the decision to not delever. And by doing so, we've kept so much of the earnings power, in fact, all of it. And that's another big reason for having the level of confidence about the compelling opportunity and the forward returns.

Ameeta Lobo Nelson

That's helpful. And then just shifting to the capital structure. You talked about the benefits of diversifying with the preferred. How should we think about the preferred mix from here? Is there a level of preferred within the capital structure that you're thinking is appropriate?

Smriti L. Popenoe

Yes. I mean we're really happy with the issuance and the timing of that particular deal. It was really massively accretive to the common shareholder. We think of ourselves as having a significant amount of capital structure flexibility here at this point. The total, I think Mike mentioned preferred in the stack is about 7%. That number has room to go higher.

As with all of our capital structure decisions, right, and capital raising decisions, it's opportunistic. It's thinking through the things like how accretive it is to shareholders, where we can put the capital to work relative to the cost of that capital. But suffice to say, I think we're really happy with, one, reentering the market, the reception that we got and then the possibility that this could be something that we could continue to use in terms of a source of capital in the future.

Operator

We'll go next to Merrill Ross with Compass Point.

Merrill Ross

If we look at Slide 24 and look at the changes to your hedge position, it would be helpful if you described when you changed the positioning and what you were thinking at the time? And are you satisfied with where you were positioned at the end of the period?

Terrence Connelly

Yes, thanks for the question. The hedges were put -- we added to the hedge book pretty much in lockstep as rates were moving. We came into the quarter with a very strategic mindset in terms of continuing to add to hedges as rates moved higher. So it was progressive over the course of the quarter.

As we broke through 5% there was a clear realization of the new profile that mortgages would offer in terms of the convexity that we discussed. So we had a very clear game plan to put in place there and continue to add the hedges. So you'll see a modest increase in some of the longer hedges, in particular, on Page 24, as you mentioned, in the -- on the swap side of the book as well as on the treasury futures side.

Merrill Ross

Yes. Okay. And then maybe, as Freddie Mac says that [indiscernible] mortgage rate is going to be 7.5% through 2027. So wondering where in that market, you would see more value. Clearly -- it seems not in TBAs, but you prefer a discounted lower coupon pools over the current coupon?

Terrence Connelly

Yes. Let me first make a comment on the notion of a static mortgage rate over time is not something we spend a lot of time thinking about. We're thinking about a range of scenarios and preparing for a significant number of outcomes, both higher and lower than that 7.5% mortgage rate that they mentioned.

So yes, our portfolio is built accordingly, right? We're built for -- to generate solid cash flows throughout a range of environments. I do think that a lot of these -- that convexity profile we discussed and the stable duration profile that's so important to earning these ROEs is most compelling in coupons, say, 5.5% and lower at this point.

Operator

We go next to Trevor Cranston with Citizens JMP.

Trevor Cranston

It looks like your overall rate exposure came down this quarter. I'm curious if you guys could just kind of share your macro thoughts on how you think about the risk of rates moving significantly higher or lower from where they are today? And generally, how you think MBS would perform if there was to be a significant move in rates either way from here?

Terrence Connelly

Yes. Trevor, I'd say overall, the most important thing to keep in mind is what's priced into swaptions markets, into the interest rate options markets that I mentioned and those implied volatilities being higher as high as they are, which is, again, notably higher than realized volatility. I think that's one of the most important constructs that will drive our ability to earn these ROEs and the returns that are available. So I do think the convexity profile in a higher rate environment for the overall mortgage market is very stable. Those durations just don't extend all that more.

Overall, you think from a very high-level macro perspective, overall housing turnover is around 4.5% per year. If you look at existing home sales, which are very depressed, and you could make a case are making a bottom formation over the last several years. So at these turnover rates that are implied in the mortgages, you've got very low turnover in the mortgages that drives the mortgage cash flows, creating that very stable cash flow. And then you have this wide spread that's there because the implied vols are so high on the macro side. It makes it very compelling for us to earn these ROEs that we're talking about.

So broadly, it's not an environment where taking significant macro exposures makes a ton of sense. We're being paid for it in the spread. So by design, very strategically, that's where our focus is on the spread and earning those ROEs without more or less agnostic to interest rate direction.

Smriti L. Popenoe

Yes. Trevor, I would say like the way the mortgage market is priced today, the level of extension on the margin for the next 25, 50, 100 basis points is very limited because we've extended 90% already, right? So any future extension from rates rising is limited. So if you're concerned about, again, rates up, those types of scenarios, what T.J. is mentioning is that it's all about the price of options in the implied vol markets and those -- that's -- the mortgage market today is already pricing significant risk premium in implied vols. So we feel like we're getting compensated for that incremental risk.

Trevor Cranston

Yes. Okay. That makes sense. And when you guys were mentioning the incremental ROEs kind of in the 20-plus percent range, I think you said you had calculated that based on the 10x leverage number, which is a little bit higher than where you sit today. So I was just wondering if you could clarify if you think the existing portfolio as it sits today provides good dividend coverage. And just kind of curious overall how you're thinking about the dividend policy in light of all the changes in the third quarter perhaps?

Smriti L. Popenoe

I think you've got to go back to the idea of earnings power in the portfolio, Trevor, not having delevered in the quarter. That just means that we've taken the mark in book value, but the earnings power of the portfolio is preserved. And over the past several quarters, we've been pretty confident about our ability to cover the dividend even before we got to this point.

So from here on, I don't think that's really changed that much because we did not significantly adjust the portfolio, definitely not on the asset side, right? So that piece of it, I think, is relatively well preserved. In terms of the marginal ROEs, we use a range of numbers. T.J., you can clarify on the low 20s, et cetera, the numbers that we quoted.

Terrence Connelly

Right. Yes, there's significant variables involved there, Trevor, but the numbers I was quoting were based on a 10 leverage number. And as you point out, we were sitting at 9 at quarter end. I will note, we have net purchased assets since quarter end as well.

Operator

We have no further questions. I'd like to turn the floor back to Smriti Popenoe for any additional or closing remarks.

Smriti L. Popenoe

Thanks, everyone, for joining us today, and we look forward to updating you on our performance in January.

Operator

This concludes today's conference. We thank you for your participation. You may disconnect at this time.