Smriti Popenoe

"It makes for a great investing environment for us. The level of rates is actually not as important as the shape of the yield curve. Our borrowing costs are still much lower than where we are investing." Despite rising 10-year yields due to inflation fears, the spread between short-term borrowing costs and long-term mortgage yields remains highly profitable for agency mortgage REITs. Additionally, government intervention (GSEs buying $200B in MBS) provides a pricing floor for the asset class. LONG. The specific mechanics of the current yield curve and direct government support create a highly favorable net interest margin environment for Dynex Capital. If inflation spirals out of control and forces the Fed to aggressively hike short-term rates, borrowing costs could spike and invert the curve, crushing net interest margins.