MFA Financial, Inc. (NYSE:MFA) Q3 2019 Earnings Conference Call - Final Transcript

Nov 06, 2019 • 10:00 am ET


MFA Financial, Inc. (NYSE:MFA) Q3 2019 Earnings Conference Call - Final Transcript


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Ladies and gentlemen thank you for standing by and welcome to the MFA Financial Inc. Third Quarter Earnings Call. [Operator Instructions]. I would now like to turn the conference over to your host Mr. Hal Schwartz. Please go ahead.

Harold E. Schwartz

Thank you operator and good morning everyone. The information discussed on this conference call today may contain or refer to forward-looking statements regarding MFA Financial Inc. which reflect management's beliefs expectations and assumptions as to MFA's future performance and operations. When used statements that are not historical in nature including those containing words such as will believe expect anticipate estimate should could would or similar expressions are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they are made. These types of statements are subject to various known and unknown risks uncertainties assumptions and other factors including those described in MFA's annual report on Form 10-K for the year ended December 31 2018 and other reports that it may file from time to time with the Securities and Exchange Commission. These risks uncertainties and other factors could cause MFA's actual results to differ materially from those projected expressed or implied in any forward-looking statements it makes. For additional information regarding MFA's use of forward-looking statements please see the relevant disclosure in the press release announcing MFA's third quarter 2019 financial results.

Thank you for your time and I would now like to turn this call over to MFA's CEO and President Craig Knutson.

Craig L. Knutson

Thank you Hal. Good morning everyone. I'd like to thank you for your interest in and welcome you to MFA Financial's Third Quarter 2019 Financial Results Webcast. With me today are Steve Yarad our CFO; Gudmundur Kristjansson and Bryan Wulfsohn our co-chief investment officers; and other members of senior management. Rates markets experienced continued volatility in the third quarter of 2019. Global growth slowdown concerns and trade tension contributed to a decision by the Fed to cut rates at the end of July. August brought a furious rates rally with 10-year rates plunging from 2.14% in mid-July to 1.45% by Labor Day and two-year rates falling by approximately 40 basis points during the same period. We witnessed an abrupt reversal in the first 2 weeks of September when two -year rates retraced almost this entire 40 basis point range while 10-year rates backed up 45 basis points. The Fed again reduced the funds rate in the middle of September and then followed with a third rate cut last week. We also witnessed some surprising illiquidity in the repo markets in mid-September with overnight funding rates as high as 5% for a brief period before decisive action by the Fed settled these markets. Needless to say for levered investors in mortgage assets this environment has been extremely challenging.

While we cannot claim to have anticipated the stunning developments in rates markets MFA's investment strategy is very much intentionally not dependent on accurately predicting interest rate moves and we are happy to report that