Peter Federico: Chris?
Chris Kuehl: Yes, sure. So, with respect to specified pools, I would say it’s likely that over time, our weighting versus TBA will gradually increase. As Peter mentioned, we added about $4 billion so far this quarter, and the majority of that was in specified pools given some good opportunities that’s after on a net basis, our spec pool position shrinking a bit during the fourth quarter. I would say, generally speaking, sourcing convexity through pools is cheaper than purchasing optional protection in the rates markets. But our convexity position is quite low across a pretty wide range of rate scenarios. And so we will continue to be opportunistic and patient with adding pools. We have done a lot of repositioning over the last few quarters, and we think the portfolio is very well positioned today and provides a great combination of carry, total return potential and liquidity.
Peter Federico: And with respect to your question on the short-term hedges, I guess I would say that our expectation is that we would likely not need to increase those hedges, although there is certainly a scenario where we may change that view. And I would say initially, my gut is that we wouldn’t need to is because I think the Fed is really close to being done. If it’s not this meeting, my expectation, it’s the next. But we could obviously prove to be wrong on that. Inflation could prove to be much more stubborn and the moderation that we have seen reverse. And in that scenario, there is a scenario that the Fed goes much more than we currently anticipate. And if that environment starts to evolve, then we would think about adding more short-term rate protection. But for right now, I think our position is fairly well placed.
Chris Kuehl: Eric, and I think you had also asked a question about what could expand coupon swaps and higher coupons or drive valuations tighter there. I think the short answer is lower rate volatility, lower implied volatility. Option costs on production coupon mortgages is still at record levels. And so a decline in implied volatility certainly has the potential to bring option costs materially lower, which would likely result in nominal spreads coming in.
Peter Federico: And just to add to that last point because that I think is a key part of, again, why our outlook is improving and the decline in volatility. If you look at sort of implied volatility back in September, at the end of September, at least this is €“ if you look at where the options market was pricing volatility, it was pricing at around 9.5 basis points per day on the 10 year. To put that in perspective, the 10-year average is more around 4.5 basis points or 5 basis points a day. And it’s been gradually coming down. Today, we are at probably an applied level of around 7.5 basis points a day. So, to Chris’ point, eventually the market implied volatility is going to come back to the historical norm, and that’s meaningfully lower, 25%, at least lower, and that could be easily 25 more basis points of tightening on production coupons.
Eric Hagen: That’s great perspective. Thank you guys very much.
Peter Federico: Sure. Thank you. Appreciate your question.
