AGNC and CYS purport to have some hedging strategies which might be able to protect the book value from an increase in interest rates which is the ultimate threat to a highly leveraged portfolio. AGNC and CYS thus actuallly have been reporting GAAP earnings which could support their dividends.
ARR is simply a vehicle to use swaps, futures and leverage to turn capital into income and thus pay shareholders back their ever deminishing book value in the form of dividends that is why ARR always reorts large GAAP losses that are about the same magnitude as the dividends.
Exactly, GAAP earnings reflect the true economic condition. When ARR earns X amount of money from net interest payments on its mortgage backed securities and simultaenously loses X amount of money on swaps and futures it has zero economic (GAAP) eranings, but the inerest income is taxable while the money lost on swaps and futures does not reduce the "taxable" income as per the IRS REIT rules. Thus, ARR must pay it out in dividends to keep its REIT status. If a non-REIT was paying dividends but not really making any economic profits it could not get a clean audit opinion. But, ARR has no choice but to pay thise dividends so the book value keeps going down since they are not really earning anything but paying large dividends.