If you look at the SOFR, it’s probably around 150-ish basis points, a 50-50 blend, maybe something in the neighborhood of 140 basis points today, which is why those returns are still really compelling. 140 basis points with sort of average leverage position as a starting point for this analysis of around 8x, plus you add back the current coupon yield of close to 5%. And for us, we are only subtracting 1% given our cost structure, I think you can reasonably get expected returns around 15% in the current environment, which we believe is very attractive. So, that’s sort of what we are seeing now on a mark-to-market basis for our portfolio and for marginal return opportunities. Again, that’s on higher coupons and the conversation we just had sort of informs you about different coupons, but that’s a good starting point.
Bose George: Okay. Great. Thanks.
Peter Federico: Sure.
Bose George: And then just a broader macro question. Just the whole debt feeling debate, just curious what your thoughts are and how that kind of informs your positioning?
Peter Federico: Well, it’s a really good question. And obviously, it’s a big unknown that we are going to have to contend with as the year goes on. Unfortunately, it’s probably coming in a time when we thought we would actually have a lot more rate stability in our outlook given the fact that I think the Fed is going to be pretty much done with what it needs to do in the next couple €“ two or three meetings. So, as we go later in the year, and the middle of the year we will obviously have to deal with a lot of uncertainty. The challenge with the debt ceiling is it’s not clear at all, which direction that may drive interest rates if at all. You can make a case that convened to higher treasury rates because of the credit outlook or the potential of the default you could look at it from the other perspective.
And I think in the last episode led to a rally in rates. So generally, what that means for us is when there is more interest rate uncertainty or just financial market uncertainly more broadly, you will see us tend to reduce our risk profile, particularly as it relates to our interest rate exposure. And as we get closer to that, we might likely operate with very close to a zero duration gap, just to give us a bit more protection against the uncertainty of the environment. Ultimately, I think the issue will be resolved, but it’s unclear as to how long that’s going to take to get resolved and what conditions may occur first before it gets resolved, but we will have to deal with that as we go through the year.
Bose George: Okay. Great. Thanks.
Peter Federico: Sure.
Operator: The last question comes from the line of Eric Hagen with BTIG. Please go ahead.
Eric Hagen: Hey. Good morning. Just a couple of follow-ups on how you are managing the portfolio and the structure there. Just what kind of value do you think you are getting? And do you see at this point in the higher coupon specified pools? Are there any scenarios away from just the level of mortgage rates, which could maybe support premiums strengthening in that portfolio? And then on the hedging side, what kind of value do you think you are getting for the short duration hedges at this point? I mean are there any €“ are there any scenarios where you could add short duration hedges on top of what you are already carrying? Thanks.
