The yield spread is decreasing, not only AGNC, but all M-REIT's. Everyone is fixated on the 10 yr treasury and 30 yr. MBS yields which receded a tad recently, but it is the short term yields that are rising, 30 day, 60 day, 90 day, 3 mos., 6 mos., 1 yr. and 2 yr. Hence, AGNC borrows at the short end and uses leverage which is killing the spread. They can't hedge short term and long term 30 yr. They put all their hedging I believe in 30 yrs. MBS to protect against convexity.
All the M-REITS were caught off guard with the short end rising, almost just like the long end rise last spring. Dumb and dumber, I guess. What will be the excuses this time.......?