MFA Financial, Inc. (NYSE:MFA) Q2 2023 Earnings Conference Call August 3, 2023 11:00 AM ET

Company Participants

Hal Schwartz - Investor Relations

Craig Knutson - President and Chief Executive Officer

Steve Yarad - Chief Financial Officer

Gudmundur Kristjansson - Co-Chief Investment Officer

Bryan Wulfsohn - Co-Chief Investment Officer

Conference Call Participants

Bose George - KBW

Steve Delaney - JMP Securities

Doug Harter - Credit Suisse

Eric Hagen - BTIG

Operator

Ladies and gentlemen, thank you for standing by and welcome to MFA Financial announces Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. And I will now turn the conference over to our host, Mr. Hal Schwartz. Please go ahead, sir.

Hal Schwartz

Thank you, operator and good morning everyone. The information discussed on this conference call today may contain or refer to forward-looking statements regarding MFA Financial, Inc., which reflect management’s beliefs, expectations and assumptions as to MFA’s future performance and operations. When used, statements that are not historical in nature, including those containing words such as will, believe, expect, anticipate, estimate, should, could, would or similar expressions are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they are made. These types of statements are subject to various known and unknown risks, uncertainties, assumptions and other factors including those described in MFA’s annual report on Form 10-K for the year ended December 31, 2022 and other reports that it may file from time-to-time with the Securities and Exchange Commission. These risks, uncertainties and other factors could cause MFA’s actual results to differ materially from those projected, expressed or implied in any forward-looking statements it makes. For additional information regarding MFA’s use of forward-looking statements, please see the relevant disclosure in the press release announcing MFA’s second quarter 2023 financial results. Thank you for your time.

I would now like to turn this call over to MFA’s CEO and President, Craig Knutson.

Craig Knutson

Thank you, Hal. Good morning, everyone and thank you for joining us here today for MFA Financial’s second quarter 2023 earnings call. Also with me today are Steve Yarad, our CFO; Gudmundur Kristjansson and Bryan Wulfsohn, our Co-Chief Investment Officers; and other members of senior management.

The interest rate environment in the second quarter of 2023 was another volatile one, with rates grinding higher for most of the quarter. 2-year treasuries were below 4% early in the second quarter after rallying in the aftermath of the banking crisis in March. However, as the fear of additional banking fallout began to fade, the bond market finally seemed to capitulate and began to take Fed Chair Powell’s consistent message to heart. We don’t hear so much about the false optimism of a rate cut later this year and bond yields particularly 2 years moved higher throughout the quarter to reflect this reality. 2-year treasuries ended the quarter almost 100 basis points higher and the 210-year inversion widened from about 50 basis points at the beginning of the quarter to about 100 basis points at the end of the quarter. This inverted curve, together with general interest rate volatility, continued to make levered investing in fixed income and in mortgages in particular, very challenging. That said, MFA’s risk management discipline and strategic initiatives have enabled us to weather this storm extraordinarily well.