the 30 yr (and 10yr) bond have moved up significantly in the last 2 months...30 yr up 14% (2.75 to 3.15 today). Should I assume, if the 30 yr can hold above 3% or even go higher, this move will be very positive for AGNC? ie doesn't this impact their net interest spread positively?
Of more immediate concern then changes in the spread income are changes in mbs premium amortization. If the cpr goes down (when rates go up....), then preium amortization drops and net income goes up. AGNC already has a low cpr portfolio by design, but there still will be a major impact. The changes in spread income only happen gradually as the portfolio and repos roll over.....Repo rates can change very fast, that is why they use swaps and possibly long term repos.....
Alot of factors, Over a one to two year horizon, what the previous poster said about spread rates is important, but on the short time horizon, there are alot of varialbles.
You need to focus on spread income, which is mostly the 10-year number. The 'cost' of borrowing is the short term rates which can be as high as the 2-year but generally has been 1-6 month rates.
This is why a spike in the short-term rates would be bad for the companies if it were not also accompanied by a spike in the longer term rates. This means you want a sharper curve, not a flatter curve in the treasuries.