Good morning and welcome to the First Quarter 2019 Earnings Conference Call for Orchid Island Capital. This call is being recorded today, April 26, 2019.

At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith, belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements.

Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K.

The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company’s Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead..

Thank you, operator, good morning everyone. I hope everybody has had a chance to download or to view online our slide deck we released last night. I will be spending, as usual, the bulk of my time going through the slides and of course we have our press release with further details regarding our earnings.

With that, I will start walking through the slide deck. As always, I’ll start on Slide 3 and just give you an outline of what we’ll discuss today, and the outline really hasn’t changed since prior quarters. First thing I’ll do is, go through our overview of our results for the first quarter of 2019.

I’ll speak to developments in the market with an eye towards what that meant for us and how we did with respect to positioning the portfolio and our results, go through our financial results and then go into our portfolio characteristics, including hedging, and then speak briefly about outlook and strategy. Turning to Slide 4.

Orchid Island Capital generated a net income per share of $0.22, incurred $0.02 loss on realized and unrealized gains and losses on RMBS and derivative instruments, and that includes net interest income on our interest rate swaps, earnings per share of $0.24 excluding that $0.02 loss across the balance of the portfolio.

Book value per share was $6.82 on March 31, a decrease of $0.02 from $6.84 at the end of 2018. Total dividend of $0.24 per share were declared during the first quarter. Since its initial public offering, the company has declared $10.305 of dividends.

Economic return for the quarter was $0.22 or 3.2% for the quarter that’s not annualized, and the company issued slightly under 2 million shares under its ATM program in the first quarter. Slide 5 just shows you our results. Going back to the inception of the company, one thing I do have to note, we tend to be one of the earlier companies to report.

As a result, we do not have the results for the peer group at least in terms of being able to calculate an average. So, this chart tends to run one quarter behind. So, as a result, it runs through the end of 2018.

The first column just shows you the various items we are showing, it’s chronological, so we start with 2013, run through the end of 2018, and then show a three-year, five-year and since inception look back returns.

The next column is our return – the next column after that is the peer average, the peer groups are defined in the bottom of the page, and the far column is just the relative performance. I’ll just point out that on the very bottom line our results versus our peer group since inception through the end of 2018 exceed that of our peer average by 4.7%.

Now turning to market developments, and as I said, always like to look at market developments in the context of what it means for Orchid or a levered bond investor. The first quarter was very pivotal, as you can see on the left-hand side, the red line represents the shape of the U.S. Treasury curve at 3/31.

The right side is the swap curve, and obviously we had a very profound change, not that only did we move downward in yields, but also the shape of the curve changed somewhat dramatically.

Over the course of three meetings, starting in December of 2018, January of 2019, and then March, the Fed’s outlook for monetary policy changed dramatically as we all now.

They’ve adopted a very dovish stance, very balanced looking forward, data dependent, and based on comments made recently by various governors, maybe looking more towards inflation than actual growth data. Today’s data would be a case in point where GDP growth for the quarter was quite strong, although the inflation data was somewhat soft.

As you can see in the chart on the left-hand side or the right-hand side with several points on the front end of the curve changed below the current level of fed funds, which is 2.4%, and this reflects the market anticipating future policy to be a cut rather than a hike.

And this is very critical because as we entered near the end of 2018, Orchid Island and many of our peers were positioned very defensively both in terms of the assets we held in terms of trying to minimize the extension risk of those assets, less concerned with prepayments, and also a very high focus on hedging our funding cost which were going up every quarter, but that has shifted dramatically this year and we have taken steps both on the asset side and on the hedged side to address these developments.

On Slide 8, you can see the movement in the ten-year treasury and the ten-year swap both for the quarter and with a two-year lookback, and I just want to point out on the top left if you look at the ten-year treasury, you can see that for most of the quarter, we were trailing in at 2.60 to 2.80 range, and as a result of the Fed meeting in March, we broke out of that range to the low side, and the market seems to be trading at least for now in a new range of 2.40 to 2.60, and this week we’ve actually – last week, we’re at the high end of that range and now we seem to be moving back towards the low end of the range.

Who knows what the future holds, but we clearly have seen that paradigm shift in the markets over the last few quarters. Slide 9 just shows you this is a very familiar slide, we’ve talked about the slope of the curve. We are levered bond investors like all of our peers and managing our spread of course is very important.

As you can see over many, many years and certainly in the case of Orchid Island, this basically covers our life, our history. The curve has been generally flattening throughout that entire period.

It is only in the last few months that we’ve seen the curve starting to steepen, and the reason is that the – again, this was the spread between the 5 and 30-year treasury.

The five year has moved lower relative to the 30-year reflecting the market’s new expectations for Fed easing, and so that’s created steepness in the curve and the market continues to steepen today. Slide 10 shows you the performance of various fixed rate 30-year coupons versus hedges using JPMorgan data. This goes back to the end of 2017.

So, we’ve talked about this in the past. The blue line represents a 30-year mortgage. The red is a 3.5% coupon. The grey is 4%, and the green is 4.5%. As you can see in the fourth quarter, the higher coupons have done quite poorly, whereas 3.5% or 3% coupons have done well and the reason for this is several.

As we’ve pooled out a high rate environment into a low rate environment, and our winter season, the market of course expects speeds to accelerate just for seasonal reasons, but also because you’ve got lower rates.

And also, another thing that is very important and I’m going to talk about is the fact that the TBA deliverable, the cheapest to deliver collateral that the market receives, takes delivery off the TBA has changed over the last 6 or 9 months.

What we’ve continued to see on a regular basis is, collateral that’s produced with a weighted average coupon for the borrower, but it is very far above the coupon the investor receives, and this has to do with things that are not relevant for this compensation it’s more about [indiscernible] point of the matter is, is that we’re seeing collateral delivery with a weighted average coupon that’s far above the net coupon, tends to have higher loan balances, and higher FICO scores.

As a result, it’s very, very callable or refinanceable and that would of course than mean that higher coupon securities are more refinanceable and they would be otherwise and that’s reflected in their performance.

With respect to the 3% coupon, obviously had a very strong quarter and has given back some of that since that had a lot to do with convexity hedging as rates move lower, especially on the part of services. Turning now to Slide 11.

One of the consequences of the change in the deliverable of the TBA is that the roll market is being impacted in a negative way in a big fashion.

As a result, the roll had dropped that you typically see, which sometimes is reflective of very, very well financing and represented a good investment opportunity has become very, very poor off late and we show 4.5% coupons here, but I would point out that across the stack they are very similar.

We did see an occasional pop here and there in one coupon for a short period of time, but these have been well. As a result, income from the dollar roll market has been soft.

However, as you know, we do not use the dollar roll market much from an investment side, we use it as a hedge and that roller drop is actually advantageous from us in terms of our hedge cost. So, we actually welcome that development.

On the top right you see payoffs for certain specified pools as you would expect given the poor quality of TBA specified pools have done extremely well.

The absolute prices actually stay lower and what we saw the last time rates were at this level, but it’s not because the pay ups are much a drop, it’s because the price of the TBA has dropped, all else equal, simply because of the deliverable.

In fact, last week or middle of last week when we were at the higher end of the range, we’ve been in this 2.40 to 2.60 range, although there were some specified pools that traded very aggressive losses.

Next week we’ll start to see the main production cycle and you would expect those levels to be very, very robust, especially with the rally this week, especially for the hold. Turning to Slide 12. This is the same performance graph for the same coupons, which is reflecting what you call LIBOR OAS.

It’s for TBA on the left side, specified pools on the right side and you can see all these actually cheapened.

But one thing to keep in mind, when you calculate an option-adjusted spread, a component of that is the convexity cost of the fact that the duration of the mortgage asset can change as rates move and a big driver of convexity cost us volatility.

Volatility has been lower and lower and lower of late, as a result the convexity cost is smaller and the spread seems to widen. These assets were [cheating of questions] in some cases, but a lot of this running really reflects what’s going on in the dollar market as much as anything.

Slide 13 shows the results across the aggregate index for the quarter. As we mentioned earlier, we had a very meaningful pivot on the part of the Fed.

The Fed is now aligned with all central banks, all the major industrialized economies across the globe and have adopted a very dovish stands in the eyes of the market these central banks, basically have their back. As a result, we’ve seen a very strong risk on [return] to the market.

So, when you look at this data, right in the middle of the page is the aggregate, the U.S. ag.

Total return of 2.57 was very positive, but if you notice, if you look to the right, you tend to see the riskier asset types, domestic investment grade corporates, emerging investment-grade corporates, high-yield, immerging high-yield, and finding the activities, and to the left you see the more risk, the less risky assets like Treasuries in mortgage-backed securities, agency mortgages that is 2.17% for the quarter.

Slide 14 just shows you our volatility implied by volatility on a three-month by 10-year swaption.

The spike you see on the right-hand side of the page reflects the reaction of the market to the surprise, to the double side of the Fed at their March meeting, but since then [rolls] come off and continues to come off and is actually at multi-year lows, and that’s definitely was reflected in those OAS numbers we mentioned.

Slide 15 just shows you the spread between one-month LIBOR and the one-month overnight index swap and you can see it’s nothing much to say here than the fact that’s been relatively stable off late for the third part in 2019. 2016 is [cutting cap sides] what we’ve been talking about and in pictures.

If you look at the bottom left, you see the red line, which would be the dot plot. This would reflect kind of a consensus of FOMC members outlook for Fed Funds going forward, that was in December of last year.

As you can see there were several more hikes of the blue line reflected the market expectations, and it’s gradually over the course of the heightening cycle tempting to always reflect less hikes than the Fed, but also nonetheless did reflect some. As you can see with respect to March that is definitely changed.

In fact, when you look at the hike, the one hike that’s in there for the Fed that’s somewhat kind of a mystery considering that their a summary of economic projections going forward shows very stable, inflation stable, and the unemployment rate slowly creeping up.

So, given the fact that they are not hiking, now you might wonder why they would hike in the future, but again that’s just their [indiscernible]. If you listen to comments made by various state governors over the last few months, they are much more dovish than as reflected there.

With respect to our financial results on Slide 18, a few things I want to point out. As usual on the left-hand side, we show our income statement kind of parsed out between what was generated in terms of net interest income on the portfolio, and then the effect of mark-to-market realized in gains and losses.

As you can see, they netted in the case of unrealized and realized gains and losses to a slight loss. I want to point out one-line item in there, which is interest rate futures. In the last year, we were positioned very defensively in terms of our funding hedges, we had them at a very high level in the very front end of the curve.

We have since transitioned away from that, but most of the loss that you see there was generated from those futures, basically a curve before we removed those positions. Going forward, the hedge book looks materially different. And that’s a result and that’s why we have a $0.02 slight gain.

With respect to the strategy and the allocation of capital, the pass-through portfolio generated the 10.1% return for the quarter, interest only securities as you would imagine with the rally were negative, close to 9%, offset – almost equally magnitude by our inverse only securities up 8% because the fact that the Fed hikes were priced out of the market, but because we are more careful allocated the interest only securities.

The net of the structured was negative 5.8, and of everything it was still a positive 3.8%, reflecting the overall bias towards the pass-through strategy. In terms of our earnings in Slide 19, a couple of things I want to point out here.

This is a very broad historical picture of our net interest spread and our dividend, and of course just walk through the items on the top of the page. The red line is our economic cost of funds and you can see that that is plateaued and actually dropped this quarter.

The net interest spread dropped as well from 2.14% to 2.01%, but that really reflects more a drop in the realized yield, although the 25 basis points and that itself was driven primarily by an increase in premium amortization.

Entering the quarter, we still had a very high concentration of high coupon fixed rate securities, mostly purchased at higher dollar prices, and speeds were fast this quarter, especially towards the end of the quarter as a result, premium amortization was a little higher and that dropped.

Over the course of the quarter and into the second quarter, we have continued to reposition a portfolio, reduce the concentration on higher coupon securities added lower coupons in the fixed-rate space, 3% and 3.5% coupon.

As a result, going forward, we had expected the weighted average coupon of the portfolio, while it might be slightly lower, the securities we’re adding are at lower dollar prices, would expect to be have lower speeds, and as a result, the realized yield should be relatively unchanged.

So, we – our outlook going forward, all else equal and of course we know that can change rapidly, but going forward, we think the earnings of the portfolios should be fairly stable. And as I mentioned, our economic interest cost seems to peaked and it actually drifted slightly lower, but absent Fed hikes or eases, that would be stable as well.

So, that's kind of the outlook short-term for the earnings front. Slide 20 just shows you the same thing. As I said, it seems like we’ve kind of hit the trough as a result of the long, long Fed hiking cycle, and it seems like we should be stable for the time being. Slide 21 just shows you an allocation of the capital, not much to say here.

If you look on the right hand side, you see kind of the roll forward across different sectors, and just one thing to point out, we did not add any of the structured securities in the quarter, and therefore, as a result, the run-off, the capital allocation shifted, but that’s really just a result of the fact that we did not add to structured portfolio in Q1.

We have since and so that capital allocation is backed closer to where it was at the end of the last year. The next Slide is 23. I want to spend some more time talking about our characteristics of the portfolio. Remember this shows you the portfolio as of 03/31. We have continued to make changes to the portfolio since then.

With each – and I’ll discuss those. The left side just was various assets of post reset ARMs, fixed rate CMOs and so forth. And in the structured securities, subsequent quality of the market value and the percent of the allocation of the portfolio. ARMs are very small, but not worth mentioning.

With respect to fixed rate CMOs, still close to a quarter percent. It was slightly higher than that at year-end. That really just reflects a rundown there. There were no changes there. There were changes to the 15-year allocation at year-end. That was about 25.6% to 15 years now at 17%.

Again, a 15-year security is generally a shorter duration defensive asset. Consistent with the developments we’ve seen in the market, our allocation has been shifted downward, and as you might expect, the 30-year allocation has increased to 52.33% at 03/31. It was at 41.33% at year end, so a material change.

But now I think we changed the allocation to 30 years, but also within that 30-year bucket. We have reduced some of the 4.5 and 4 coupons, added 3.5. They are not even show here because we didn’t have any at the time, but we have since added 30-year 3s.

So, we have a little bit more of a barbell, not quite, but moving in that direction in terms of the coupons we own and that reflects the outlook for the rates market trying to have a little more reverse coupon mix, not so defensive and not such a pre-occupation at call protection at all costs.

We’ve added some of these lower coupon securities were prepaids are not as bigger concern. We do get some duration out of those assets, and from a total rate of return perspective, they are very attractive. As a result, you would expect to see – at the end of the June quarter, this would even be more balanced.

As I mentioned, speeds were higher in the quarter. If you look to the right-hand side of the page, you’ll see the one and three-month speeds. With a 30-year and total pass-through. Those numbers now are in the low-double digits for – comparable numbers for Q4. We’re about 300 basis points or so lower than that.

So, we did see the combination of coming out of the seasonal slowdown and the rally and rate speeds pick up. And then, we would expect that they would still accelerate possibly from there, but as I mentioned, we have changed the coupon mix. We’ve added some lower coupon securities that will now prepay as fast.

And so, even if the weighted average coupon drifts slightly lower, the fact that we’ve added these lower dollar priced securities that would be expected to prepay lower.

We think premium amortization should be contained and that's why we're – we feel comfortable with our positioning in terms of just kind of the yield we would expect to earn in premium amortization going forward. Slide 24 just shows all this on a historical perspective. Slide 25 shows leverage. As you can see, we remain at the high-end of that range.

That’s where we sit today in early second quarter, and we would expect to stay there.

We think with the Fed appearing to be on hold for the time being and wanted – and central banks really across the globe in a very dovish stance, not to mention the global growth numbers we’ve been seeing, for instance, Korea just recently reported negative growth the first quarter, that the central banks to remain in a very defensive dovish posture.

And therefore, we are comfortable having a leverage at the higher end of the range. Slide 26 shows our hedge positions. I want to point out the top left, our euro dollar positions, very significant changes there.

As you see, in the case of the contracts we have in place one, we do not extend them simply because we are moving our hedges further out the curve, and we do not see as greater need to protect against increases to our funding costs in the near term.

These contracts notional is $200 million in the case of June, that was $1.5 billion at the end of the year. All the remaining contracts at $500 million, that was $1.8 billion. So, a meaningful shift there and where the debt go. If you look on the bottom right, you’ll see our swap book. We added $500 million in value of the curve swaps.

We will probably continue to add there, and clearly saw a shift in the swap book. In the swaption book, we have a position in place there also in value of the curve and we will probably continue to maintain that at the same or higher levels. With respect to TBA hedges, again, as I mentioned, the roll markets have been soft and that’s too our benefit.

We’ve shifted in and out of coupons over time, but generally 3% and 3.5% coupons. The next slide I’m going to mention is just Slide 28 briefly. What we show here is – the red line is our book valuable over time.

The blue line is the stock price and the vertical lines below it, whether they be pointing up or down, reflects sales of stock generally to our ATM program or repurchases of stock when the price of the stock has been below book value. And what we’re trying to show you here is that generally we try to be as the best students we can of our capital.

When the stock trades at our premium and as long as investments opportunities are okay or better, we tend to hit your stock. And when the stock is cheap, we like to buy back shares and try to accrete book value and we will continue to do so going forward. That’s pretty much it from my prepared remarks.

I did want to say one thing before we open it up for questions. Many of you may or may not know, Dave Walrod, was an equity with Jones recently and prior to that with Ladenburg. Dave has covered Orchid Island since – he recently passed away very unexpectedly. I knew Dave very well. Hunter and I knew Dave very well.

He’s covered Orchid since really before our inception. He’s been an analyst covering this religiously. Speak to – spoke to him very regularly, did number of road shows and Dave was a great guy and he will be missed, and I just wanted to take this opportunity to acknowledge. We all thought very highly of Dave and we will miss him going forward.

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

Thank you. [Operator Instructions] Our first question comes from Christopher Nolan with Ladenburg Thalmann. Your line is open..

Hi guys, and I echo the sentiments of Dave Walrod, he’s a great guy. The share count went down quarter-over-quarter despite issuing shares.

So, did you guys repurchase shares as well as issue?.

Yes, there were some of the – some of the buyback activity which ended in late Q4, actually settles in January. As a result of our GAAP accounting purposes, it does not – if you bought the shares back, there is a delayed reaction in recording. So, they are same with our sales..

Got you, thanks..

But I would – it would be higher today. In fact, I believe the press release we’ve put out last week on the 17th, we would have updated share count would reflect to be higher. It’s still below the peak. Through our share buyback activity, we bought back, I believe, 10.4% of all shares that we’ve ever issued.

So, we’re still below that all-time peak and shares outstanding, but we are slowly growing back..

Okay.

And Bob, do you guys have a weighted average share price for what you bought? You issued share out?.

It’s in the Q. I don’t have in front of me, but it will be in the Q released later today. I wanted to say, it was 6.84..

Great.

And then, I noticed that your duration declined in the quarter, should we expect it to start rising going forward given your comments?.

Well, that’s novel duration, Chris. You know there’s been times when we were positioned extremely defensively, and it was, you know, close to 3 that’s our model duration, you know, the empirical duration which matters more for us was much lower. You know, I would expect us to trade empirically longer than we did.

So, I would not put too much confidence in the model number. You know we do publish it and it’s an unbiased representation of the portfolio’s risk characteristics, but it is a model-driven number. It's – they do have their limitations there..

Chris, just – there’s definitely been a shift into lower coupons, which have – tend to have a longer duration, so, you’re certainly right on that front.

Some of the higher coupons do have higher pay ups, so they tend to also be long, but there's been a strategic shift to try to add a little bit of duration as our bonds have gotten shorter into the rally that’s occurred this year. So, we’ll continue to try to – I think our goal is to be a little more flat during the Fed tightening cycle.

We’re always trying to be slightly short – have a short bias at least empirically, and I think we want to really sort of be more flat here going forward. So, in order to do that, we’ll have to add a little bit duration in the rallies, and then hopefully back it off as we sort of delta hedge through these rate movements within the cycle..

Okay. Thanks Hunter. Final question is, Bob, in your comments you mentioned for the TBAs. It seemed that the higher coupon stuff has more – is more leverageable, more – my impression was, you can get increased leverage from higher coupon bonds.

Should we read that where your balance sheet leverage ratio could pick up back to nine times or how should we read that?.

I think it would stay in – we’ve been on 8.5% at the end of the quarter. But yes, I would expect it to stay at the high end of our historical range, which as you mentioned was about 8.5%, maybe low 9’s, and I think we’re comfortable doing that.

Consistent also with the migration, not just the high coupons with high pay ups and therefore duration, but also in contrast with our prior history of lower coupons as well, which have duration just because of the discount nature of the bonds..

Okay.

And final question, does – do you think the strong GDP number today, it sort of – gives any sort of change in terms of how the Fed might be thinking about the rate environment because from my observation it looks like GDP number came in a bit stronger than people were expecting?.

It was. It did – other than any other market rally going into the number briefly backed off and resumed rallying. A couple of things, 3.2%, 1.03% of that was net exports. The trade balance changed a lot, and then also I think there’s 0.65% inventory build, and the market assumes both of those are kind of transitory.

Another number that’s very important is we will fund our sales to do domestic purchases, which excludes net exports and inventory build. That number was 1.4%. If you go back to Q1 of last year, it was I think a little over three, it’s declined every quarter since.

And I think that might be one thing the market look forward through to, and then also the PCE data was a little on the soft side.

So, you know, it could be that what we’re seeing is continued robust growth without any inflation, and, you know, it’s kind of a paradox if you’re a, you know, traditional central banker because you assume prolonged periods of extended high high-trend growth, you should get inflation, but we don’t seem to have it, and, you know, I would assume it’s hard to say because Powell’s only been in his seat for a short period of time, but he seems to get it, and I don't think he's going to over hike in the face of soft or weakening inflation just because the growth numbers or the [indiscernible] payroll numbers [indiscernible] a little strong.

If he did, I think it will probably be a mistake. I also think that the markets, equity markets in particular would react very negatively and we’ll get kind of a repeat of what saw last December.

You know he seems to kind of get it and I think that was a good thing because at the end of the day, if you can somehow maintain growth at these levels without inflation, it’s – you know, probably it’s something [indiscernible] welcome and not try to fight. So, we'll see..

Great. Thanks for taking my questions..

Sure..

Thank you. [Operator Instructions] And our next question comes from Steve DeLaney with JMP Securities. Your line is open..

Thanks. Hi, good morning Bob and Hunter.

How are you?.

Hi Steve, how are you?.

Hi, Steve..

Great thanks.

Just one thing for me, you know, listening to a couple of earnings calls earlier in the week, we’ve seem to be getting a little disparity in terms of where people are suggesting repo is being priced and we also notice – you know, we track this, you know, the – I guess its GCF RMBS on Bloomberg and we’re also seeing some day-to-day volatility like it's not unusual for that rate to move 5 basis points or 6 basis points in a day.

So, just wanted to know if you could just give us couple of – you know tying into your chart on Page 25, just your sort of general view or conditions in the agency pass through repo market and where you’re seeing pricing currently? That would be great, thanks..

Okay. I’ll speak briefly and let Hunter talk, but I think the repo market itself has been stable. The GC market has been volatile, no doubt..

Okay..

I don’t know if that’s – other than over quarter end intra-quarter. It’s not [indiscernible] not seen that pass-through to the repo market and there’s a lot more to do with settlements of – in your cash management bills, 3, 6, 12-month bills and shortages of cash in the system..

Okay..

So, you do see volatility in the overnight funding markets, and you do see it in the repo markets over quarter end, but otherwise I would say it’s stable and trending down..

You know we don’t have a lot of exposing in the overnight market, so we tend to I guess sort of draw a little bit of the line through that volatility..

Got it..

I think, you know, our overnight repos, which are all of the federal home loan bank were priced at 285 over year end, and have since come a way off, and I think a lot of people were shell-shocked from that going into the first quarter.

There was some sort of, you know, little bit of panic in the market, so we priced in – started pricing in slightly higher repo rates trending into the end of March, and then it turned out to be just a complete nothing on the turn. So, I think it's continuing to sort of drift back down.

We still see people trying to take advantage of, you know, heightened year-end or quarter-end anxiety. But just to give you some data points I think we ….

Sure..

…pricing one-month repos in the low 260s.

If we want to get out over quarter end, it’s going to take 263, 264, 265 for say a three-month type of turn, and you’re able to do – you know because of the shape of the curve and the, you know, slight probability that the Fed cuts it some point in the next year, so, we actually see a return of term rates that are lower than current rates.

So, you can lock ….

Price again..

Yes, six-month or ….

The forward curve, yes..

Yes, exactly. So, we haven’t done anything that’s over six months yet, but we did a lot of six month in the low 260s I’m going to say..

That's extremely helpful, Hunter and Bob, and I think that the concern was that the level of 285 was kind of thrown out there, and we certainly over the years, you know, and we know that quarter end can be crazy, and, you know, I sort of remember that Japanese year-end is March 31 and that sometimes….

Yes, it is. And that was elevated then, you know..

Yes, and that exacerbates it. So, what I was trying to get at is, you know, while spot rates, you know, for a few weeks before and after quarter-end, you know, may have been that high than what you’re seeing on the run now is more like a 260 handle, whether it was 30 days or 60 days..

Yes..

And, yes, okay. That's very helpful because a lot of us – I know Chris's is doing the same thing and he probably heard the calls I've heard, and, you know, as we sit down, you know, obviously we’ve got to adjust our repo rates in our model for 2Q and beyond kind of based on current conditions and….

Yes..

…that’s a very helpful comment, so thanks for that and have a great day..

Bye Steve, thanks. .

Thank you. I’m showing no further questions at this time. I would now like to turn the call back to your speakers for closing remarks..

Thank you, operator. I thank everybody for taking the time to listen in today. To the extent somebody has questions that come up later in the day or next week, please feel free to call us or if you’re just going to catch a replay, our number here at the office is 772-231-1400. We are always here to take your questions and welcome them.

Otherwise, we will speak to you next quarter. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day..