Peter Federico: Yes. Well, it’s a moving target right now. And I guess that’s a good problem to have because our book value, as, for example, as Bernie mentioned, up almost 10% or up 10% as of the end of last week. Obviously, as our book value is changing our leverage level is going down, consistent with the increase in our book value. But sort of broadly speaking, if you look back at our portfolio, and this is hard to do because we don’t give you the interperiod numbers, but sort of the low point for our portfolio was right around the end of October in terms of our asset balance, and that’s consistent with the environment that we’re in because that was when the risk was at its highest point from a market perspective. But since that time, we have systematically added to our asset portfolio from the €“ from the end of October to now, we’ve added about $8 billion worth of securities.
We added about $4 billion in the fourth quarter. And quarter-to-date, we’ve added about another $4 billion. So €“ what that’s telling you is that we’re sort of systematically increasing our leverage from the 7.4% where we were that we reported at the end of last year, but it’s also consistent with our much more constructive outlook for Agency MBS.
Doug Harter: Got it. Thank you.
Bernie Bell: Sure. Thank you, Doug.
Operator: The next question comes from Rick Shane with JPMorgan.
Rick Shane: Good morning, guys. Thanks for taking my question.
Peter Federico: Good morning.
Rick Shane: An interesting observation, if we look at the Q4 €˜19 presentation and the market update there versus the Q4 €˜22 market update. In Q4 2019, you showed four coupons spreading 150 basis points, today in the agency market you are showing 9 coupons and a 4-point spread. You are now €“ you now have the opportunity, but the challenge of working off a much, much broader palette than you have probably at any point in your history. And sort of getting back to Vilas’ question to start the conversation, how much of where you’re playing within that spectrum is dictated by what is available and what’s attractive in the hedging market? Are you choosing assets? Or are you finding financing that you think is attractive and then solving for what the right asset is based upon duration?
Peter Federico: Sure. Let me make a couple of high-level statements and then €“ and Chris can talk about it and he’ll talk specifically about the difference in the coupons stack. But the answer, generally speaking, is no with respect to the funding. Now obviously, the exception to that is when TBA specialness is really high then obviously, we are going to shift a greater share of our assets to TBA. So, in a sense, the funding advantage outweighs the difference in the convexity profile or the delivery option. And so in an environment where issuance is really high and the Fed is really active, that specialness tends to be very, very beneficial. We are obviously shifting out of that environment. So, as that specialness goes away, it’s been really just a question of where is the best value across the coupon stack.
And Chris can talk about the fact that we now have essentially 10 active coupons. You might have to make sort of a judgment as to where the return is going to come from, total return versus earnings. Chris can talk about how we think about that.
