Julian Evans: Hi, Matt, it’s Julian. So in terms of, let’s say, you want to increase some additional EAD, we’ve obviously said that we can take off some hedges and obviously increase our leverage. I think we’ve also tried to shift the portfolio around in terms of moving to higher yielding assets into the portfolio. We did have a – each quarter, I would say, as rates have risen here, you almost have been playing a little bit of catch up with your repo cost, having moving higher and your assets kind of on the lower end and we’ve constantly tried to make some adjustments for that in the portfolio. So I think those are kind of some of the primary drivers that we have. We’re changing around the composition of the portfolio as we assess the rate market and volatility as well as the Fed. And in addition to that, we do have the option of pulling off some of our leverage coupons at this time.
Matthew Howlett: How much – Julian, how much are you willing to move up coupon? I mean, what was the risk reward of – you hear some guys that want to do the belly of the curve, some want o be higher in the curve. What do you guys stand right now to where you want to be?
Julian Evans: Yes, it’s interesting from that perspective. Look, I think long-term, and let’s say I would define maybe a year from now, six months to a year from now. I think if the economy is slowing down and the Fed is truly on hold and rates are moving lower, I do think that you want to have lower coupons in your portfolio via maybe it’s a combination of 3.5s and 4s in the portfolio. If we remain at some of these higher levels, obviously, the higher coupons yield you a little bit more in the portfolio, but you’re also in the back of your mind kind of concerned about prepayment speeds. Up until the last couple of days, if you take the last 36 hours, 6.5s were trading at a discount. Now trading slightly above par, they call it at par and 20.
I think that’s not a bad place to say, that’s the high of the coupons that I’m willing to kind of take on. Because I do believe at some point in time, this market will become refinanceable for some of the higher coupons, let’s say, 7 and 7.5. I think the servicers have teed up those borrowers that at some point when rates move to an attractive level, even if it’s 25 basis points to 50 basis points advantage, they will be refinancing them. We’ve tried to stay around in terms of when we’re adding additional securities in this portfolio at a slight discount, call it, $98 price, $96 price up to par. So lately, we haven’t purchased anything that’s been above par, but you feel like you’re getting a pretty decent amount of coupon income from a long-term perspective.
Matthew Howlett: Makes total sense. And I think the same way you guys, you’re thinking, I think the position – portfolio is very well positioned. My last question, I guess, just on, if you’ve seen more relative value in the RMBS side, I mean, what’s – I mean, is there a catalyst for the basis to tighten, I mean, on the [money]? And what will drive it? Would you care? Do you rather just have these wide spreads and just say, listen, we want to reinvest in this or do you want to take advantage of your book – the materially higher book value you would experience if the basis does tighten on MBS? Just, Jay, even through a lot of cycles, I mean, a lot of ways to make a lot of money here in the next cycle. I mean, how do you feel? I mean, is it going to be just the MBS base has tightened, or is it going to be that the sensitive part of the curve starts to go down, you guys can take leverage up? I mean, just want to hear how you see the next year playing out.
