HEDGE PORTFOLIO SUMMARY
As of December 31, 2018
($ in MM,
except per share amounts)
Notional /
Market Value 12/31/2018
Duration
12/31/2018 star-img
Net Hedge
Gains / Losses
Q4 2018 star-img
Net Hedge
Gains / Losses Per Share
Q4 2018
Interest Rate Swaps $51,625 (4.3) $(1,084) $(2.15)
Payer Swaptions 3,500 (2.1) (65) (0.13)
U.S. Treasuries, Net Short 23,398 (6.3) (611) (1.21)
Total / Q4 2018 star-img $78,523 (4.1) $(1,760) $(3.49)
Duration is a measurement of market price sensitivity to interest rate movements and represents the estimated percentage change in the market value of our mortgage assets and our hedge portfolio caused by a parallel change in short- and long-term interest rates. The duration of our investment portfolio tends to increase when interest rates rise and decrease when interest rates fall. As of December 31, 2018, we had a net duration gap of 0.2 years.
DURATION GAP SENSITIVITY star-img
As of December 31, 2018
Rates
-100 bps
Duration
12/31/2018
Rates
+100 bps
Mortgage Assets: star-img
  30 Year MBS 2.7 4.7 6.1
  15 Year MBS 2.6 3.3 3.8
Total Mortgage Assets 2.7 4.5 5.8
Liabilities and Hedges (4.3) (4.3) (4.3)
Net Duration Gap (1.6) 0.2 1.5
Changes in interest rates and changes in MBS spreads can impact the market value of our equity. The charts below outline the impact of interest rate and mortgage basis movements on our NAV.
Interest Rate Sensitivity star-img
As of December 31, 2018
(based on instantaneous parallel shifts in interest rates)
Interest Rate Shock (bps) Estimated Change in
Portfolio Market Value star-img
Estimated Change as a %
of Tangible Equity star-img
-100 (0.7)% (7.3)%
-50 (0.1)% (1.0)%
+50 (0.3)% (3.1)%
+100 (0.9)% (9.3)%
mbs spread sensitivity ("basis risk") star-img
As of December 31, 2018
MBS Spread Shock (bps) Estimated Change in
Portfolio Market Value star-img
Estimated Change as a %
of Tangible Equity star-img
-25 1.4% 14.3%
-10 0.6% 5.7%
+10 (0.6)% (5.7)%
+25 (1.4)% (14.3)%