Dynex Estimates 20%–25% Modeled Static ROE on New Investments

Dynex Capital, Inc., a mortgage real estate investment trust, outlined modeled static returns on equity of 20% for lower-coupon mortgage-backed securities and 25% for current-coupon securities, as wider spreads lifted estimated returns on new purchases. The figures are model estimates, not realized returns. They apply to new investments hedged with interest rate swaps. Dynex’s model assumes roughly 10 times leverage. The estimates also reflect wider spreads, improved convexity and reduced rate sensitivity. Dynex reported leverage of 9.0 times shareholders’ equity at Sept. 30. That quarter-end calculation includes to-be-announced (TBA) securities at cost, while the model uses roughly 10 times leverage for its new-investment estimates. The modeled returns come as the company’s existing portfolio recorded a difficult quarter.

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