Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) Q3 2022 Results Conference Call November 2, 2022 5:00 PM ET

Company Participants

Garrett Edson - Managing Director, ICR

Jay Lown - President and CEO

Julian Evans - Chief Investment Officer

Michael Hutchby - Chief Financial Officer

Conference Call Participants

Henry Coffey - Wedbush

Mikhail Goberman - JMP Securities

Operator

Good day, and thank you for standing by. Welcome to the Cherry Hill Mortgage Investment Corp Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions].

I would now like to hand the conference over to your speaker for today, Garrett Edson. You may begin.

Garrett Edson

We'd like to thank you for joining us today for Cherry Hill Mortgage Investment Corporation's third quarter 2022 conference call. In addition to this call, we have filed a press release that was distributed earlier this afternoon and posted to the Investor Relations section of our Web site at www.chmireit.com. On today's call management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to interest income, financial guidance, IRRs, future expected cash flows, as well as prepayment and the capture rates, delinquencies and non-GAAP financial measures, such as earnings available for distribution or EAD and comprehensive income. Forward-looking statements represent management's current estimates, and Cherry Hill assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC and the definitions contained in the financial presentations available on the company's Web site. Today's conference call is hosted by Jay Lown, President and CEO; Julian Evans, the Chief Investment Officer; and Michael Hutchby, the Chief Financial Officer.

Now I will turn the call over to Jay.

Jay Lown

Thanks, Garrett. And welcome to our third quarter earnings call. Central bank policy and macro economic pressures persisted in the third quarter, which drove volatility higher and certainly impacted most mortgage assets. Persistently high inflation and a well supported employment market led the Fed to enact 275 basis point rate hikes in July and September, and provided the Fed to cover to again raise rates earlier today. Fed has remained steadfast in telegraphing its mission to lower inflation to its target level and markets have reacted significantly to any rhetoric related to the path and pace of future tightenings in this cycle. This has helped fuel expectations for short term rates to exceed the level policymakers have previously outlined. Additionally, the US Treasury 2s10s curve inverted 51 basis points over the quarter moving from plus 6 basis points at 6.30 to minus 45 basis points at the end of September, signaling potential for a forthcoming recession. While the US 10 year treasury finished the quarter at 3.8%, 78 basis points above its closing level at June 30th, it surpassed 4.25% at one point in October. The increase in rates and the shape of the yield curve were relevant to the performance of RMBS assets in our sector, and much has been discussed about how the rising treasury rates and increased volatility has impacted mortgage spread widening this year and its impact to REIT book values.