In a sense, the spreads and book value are reciprocals. If the mortgage rates rise, the book value decreases for the MBS which you already have. But, the spread between your borrowing cost and the mortgage rates may increase. So your book value may go down while your distributions are increasing. It does not always work that way, only if the spread between short term borrowing and long term borrowing widens.
not exactly. but you are close. it is the changes in the spread that are reciprocal to the changes in book value, which is sadly multiplied by leverage, and that is true only for as long as short term rates are stable. if short term rates also increase, the spread will either not increase, or increase more slowly, while BV will still get killed.
once again. I urge everybody to wait for the dividend announcement, on order to get a clearer picture of what is going on. as a reminder, the board has a fiduciary duty to do what is best for the business, not what is best for their personal fortunes.