Phillip Kardis: So do you want to answer?
Dan Thakkar: Yeah, yeah. I think when we talk about it, it’s primarily, especially as Phil mentioned in his comments about purchasing the non-agency subs which are not financed right now. So to the extent, the funding costs go down and we are able to finance them. The returns would be boosted further. So it’s primarily a function of funding rates, not necessarily rates going down in the long end. Obviously and Phil mentioned in his comments too, as securitization markets become more stable, which we saw like how deals priced in January and yesterday we kind of got a hiccup, to the extent they become stable and we are able to accumulate loans and securitize them at a — in a stable macro environment, that’s the sector that would be benefiting from the long end of the curve.
Stephen Laws: Great. So the potential upside would be tied to declining short end as far as the new investments go.
Phillip Kardis: Yeah, I think that’s kind of fair.
Stephen Laws: Great. Appreciate the comments this morning.
Operator: Thank you. Next question today is coming from Eric Hagen from BTIG. Your line is now live.
Eric Hagen: Hey, thanks. Good morning. How are you guys thinking about conditions in the securitization market related to interest rate policy at the short end of the yield curve? How do you even see that demand equation changing from securitized debt investors themselves and their appetite for more debt, especially as you think about maybe calling some of the debt that you have in your securitization pipeline already?
Dan Thakkar: So as I just said, Eric, we would like to see the securitization markets a little more stable before we get into the markets again. So we are going to be accumulating loans. We saw in January, especially in the non-QM space, the AAA is priced in a range of like 143 basis points to 150 basis points. And as I said, if this we get a little more clarity in the first half of the year, the loans that we would have accumulated are the loans that we’re going to be securitizing.
Eric Hagen: Okay. But how are you thinking about just conditions with respect to calling the pipeline of debt that you have, which is callable right now, and just where you can issue some of that debt and maybe extract some capital.
Subramaniam Viswanathan: Currently, the sec debt, if we lock it in at the current rates, it is locked in for a longer period of time. So we are looking for the front-end rates and general market to be — like the rates to come down, so we can get better funding rates for a longer term.
Eric Hagen: Right. Okay, that’s helpful. Thanks.
Subramaniam Viswanathan: But it also depends on what is available in the market. So sometimes it might be lucrative to take on a little expense on funding, if you are getting very accretive assets in the marketplace.
Eric Hagen: Right. No, that does make sense. How are we also thinking about the fixed to floating rate preferred? I mean, it looks like that’s going to reset with this year. Do you think there’s situations or conditions where you might look to call those or redeem them as they turn into their floating leg?
Phillip Kardis: Yeah, I think we evaluate all those options. And I think as we mentioned right now, we think that with cuts coming in the future, at the end of the year and through next year, that — while the — we expect the floating rate to reset higher, we see that coming down over time and probably looking to deploy capital and buying new assets rather than at this point retiring that. But that’s a case-by-case, and fact-based analysis that we’re constantly looking at. So things could change and we could come to a view that it would make some more sense to actually start repurchasing it. But that’s part of the mix of how we think about deploying capital in new investments versus reducing that expense.
Eric Hagen: Yeah. Thank you guys for the comments. Appreciate it.
Operator: Thank you. Next question today is coming from Trevor Cranston from JMP Securities. Your line is live.
Trevor Cranston: Hey, thanks. Just one follow-up. Do you guys have an updated estimate on where book value stands so far in the first quarter?
Dan Thakkar: Yeah, sure. So while the most recent Fannie RPL sale traded pretty well with the sell-off in rates since quarter end, and especially yesterday, which accelerated, I would say, like, we are down roughly a point or so.
Phillip Kardis: A percent.
Dan Thakkar: 1%.
Operator: Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over to management for any further or closing comments.
Phillip Kardis: Hi. This is Phil Kardis. I’d like to thank everyone for participating in our fourth quarter and full year earnings call. And we look forward to speaking to you on our earnings call for the first quarter 2024.
Operator: Thank you. That does conclude today’s teleconference webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
