Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) Q3 2023 Earnings Call Transcript

Jay Lown: Sure, Matt. It’s a topic of regular debate here. And to your point, cycles matter. And if you pay attention to only the periods where the Fed was a major participant in the space and kept spreads tight, then you might have a view that spreads are materially wide relative to historical levels. But once you introduce history going back further than the financial crisis in 2008, you see a slightly different picture which suggests that maybe they’re slightly wide relative to historic levels. So I think what we’re trying to do here is over time get a better picture of what spreads normalized would look like in an environment where the Fed is not an active participant in the space and how tight those spreads should get relative to the relative value in the space.

And because, quite honestly, we don’t have the perfect answer to that, we have chosen to, one, hedge a fair amount of that out with TBA to protect ourselves from the volatility in the space today; and two, the cost to hedge with TBAs today is not prohibited. So we’ve decided to take that approach as well. Should any of those catalysts change or we have a more definitive view on the direction of rates and the level of volatility, I would expect us to make changes to our head strategy. Does that help?

Matthew Howlett: Look, a quarter you put up here, I mean, no one’s good. It’s just terrific what you’re able to do with high volatility. And it absolutely helps. It seems like you guys are very conservatively positioned. And you’ll rotate the portfolio as you see opportunities. So that’s it. Let’s look forward to hopefully the next leg in the cycle, and you guys are having great returns for shareholders. I really appreciate you and the team.

Operator: And I’m showing no further questions at this time. I would like to turn the conference back to Jay for closing remarks.

Jay Lown: Thank you, everyone, for joining us on our third quarter conference call. We look forward to updating you on our fourth quarter earnings call next year. Have a good evening.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.