I dont know how I can put this any more simply
You and I both buy a 4% bond on sep 30, only difference is mine is delivered immediately and you buy yours 3 months forward for cheaper. Lets say I pay 104, you pay 103. From Sep to Dec I will get a check cash coupon (less any prepayments for $1). You on the other hand get nothing except the commitment you will get a bond at the end of the year whihc you bought for $1 less. In economic terms we are equivalent. I have 104 of bonds at Dec30 with no unrealzed gain but $1 more in cash; you have 104 of bonds at june 30 with a cost basis of 103, a $1 realized gain but no cash. My book value is unchanged, your book value is up 1. Your 1 is drop income, you cant pay it out without selling part of your holdings and saying that you have this "income" that is just your portfolio unrealized gain is ridiculous.
For CYS, you cant have it both ways; either earnings are 48c and book value is 14.22 or earnings are 25c and book value is 14.46 as stated. This is just advantageous reporting.
That and dont get me started, the CEO was completely full of it on the conference call today. They have no call protection on those bonds whatsoever and have a big under-hedged position.
Okay, you still are the one not getting part of it. The drop income is the result of a forward purchase agreement. Okay. That means that those forward assets are not generating any income, other than drop income. So that is why core is only 0.25. Otherwise it would be much higher. As for the hedging, I believe they have it under control. They added more hedging positions as of late.