Ellington Residential Mortgage REIT (NYSE:EARN) Q1 2023 Earnings Conference Call May 12, 2023 11:00 AM ET

Company Participants

Larry Penn - Chief Executive Officer

Chris Smernoff - Chief Financial Officer

Mark Tecotzky - Co-Chief Investment Officer

Alaael-Deen Shilleh - Associate General Counsel and Secretary

Conference Call Participants

Douglas Harter - Credit Suisse

Eric Hagen - BTIG

Crispin Love - Piper Sandler

Mikhail Goberman - JMP Securities

Matthew Erdner - JonesTrading

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Residential Mortgage REIT 2023 First Quarter Financial Results Conference Call. Today's call is being recorded. [Operator Instructions] It is now my pleasure to turn the floor over to Alaael-Deen Shilleh, Associate General Counsel. Sir, you may begin.

Alaael-Deen Shilleh

Thank you. Before we begin, I would like to remind everyone that certain statements made during this conference call may constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature and are subject to a variety of risks and uncertainties that could cause the company's actual results to differ from its beliefs, expectations, estimates and projections. Consequently, you should not rely on these forward-looking statements as predictions of future events. We strongly encourage you to review all the information that we have filed with the SEC, including the earnings release and the Form 10-K for more information regarding these forward-looking statements and any related risks and uncertainties. Unless otherwise noted, statements made during this conference call are made as of the date of this call, and the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Joining me on the call today are Larry Penn, our Chief Executive Officer; Mark Tecotzky, our Co-Chief Investment Officer; and Chris Moreno, our Chief Financial Officer. As described in our earnings press release, our first quarter earnings conference call presentation is available on our website, artonreid.com. Our comments this morning will track to the presentation. Please note that any references to figures in the presentation are qualified in their entirety by notes at the back of the presentation.

With that, I will now turn the call over to Larry.

Larry Penn

Thanks, Alaael-Deen, and good morning, everyone. We appreciate your time and interest in Ellington Residential.

Last year was just about the worst year on record for Agency RMBS but the year actually ended on a constructive note, and that positive momentum continued into January. In anticipation of a slow pace of interest rate hikes by the Federal Reserve, interest rates and interest rate volatility continued to decline precipitously in January, and yield spreads tightened further. Capital flowed into Agency MBS, while new mortgage supply remained low. And for the month, Agency MBS significantly outperformed treasuries. Ellington Residential itself has had a positive economic return of over 6% in January. Markets reversed course in mid-February, however, triggered by renewed concerns over inflation and what the Fed's response would be. volatility and spreads increased, while interest rates, especially short-term interest rates surged.