XML 50 R38.htm IDEA: XBRL DOCUMENT v3.21.2
DERIVATIVE INSTRUMENTS (Tables)
 9 Months Ended
Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summarizes Fair Value Information about Derivative Assets Liabilities
The table below summarizes fair value information about our derivative assets and liabilities at September 30, 2021 and December 31, 2020:
Derivatives InstrumentsSeptember 30, 2021December 31, 2020
Assets(dollars in thousands)
Interest rate swaptions$123,506 $74,470 
TBA derivatives1,776 96,109 
Futures contracts199,728 506 
Purchase commitments3,702 49 
Credit derivatives (1)
2,683 — 
Total derivative assets$331,395 $171,134 
Liabilities 
Interest rate swaps$754,248 $1,006,492 
TBA derivatives155,515 — 
Futures contracts108 19,413 
Purchase commitments2,263 — 
Credit derivatives (1)
— 7,440 
Total derivative liabilities$912,134 $1,033,345 
(1) The maximum potential amount of future payments is the notional amount of credit derivatives in which the Company sold protection of $425.0 million and $504.0 million at September 30, 2021 and December 31, 2020, respectively, plus any coupon shortfalls on the underlying tranche. As of September 30, 2021 and December 31, 2020 the credit derivative tranches referencing the basket of bonds had a range of ratings between AAA to AA and AAA to A, respectively.
Summary of Certain Characteristics of Derivatives The following table summarizes certain characteristics of the Company’s interest rate swaps at September 30, 2021 and December 31, 2020:
September 30, 2021
Maturity
Current Notional (1)(2)
Weighted Average Pay RateWeighted Average Receive Rate
Weighted Average Years to Maturity (3)
(dollars in thousands)
0 - 3 years
$31,311,750 0.24 %0.06 %1.30
3 - 6 years
2,780,000 0.21 %0.06 %3.72
6 - 10 years
9,131,000 1.43 %0.10 %9.29
Greater than 10 years
1,556,000 3.83 %0.10 %19.74
Total / Weighted average$44,778,750 0.60 %0.07 %3.72
December 31, 2020
Maturity
Current Notional (1)(2)
Weighted Average
Pay Rate		Weighted Average Receive Rate
Weighted Average Years to Maturity (3)
(dollars in thousands)
0 - 3 years
$23,680,150 0.27 %0.11 %1.96
3 - 6 years
3,600,000 0.18 %0.09 %4.21
6 - 10 years
5,565,500 1.40 %0.62 %7.76
Greater than 10 years
1,484,000 3.06 %0.36 %20.52
Total / Weighted average$34,329,650 0.92 %0.37 %3.94
(1) As of September 30, 2021, 19%, 54% and 27% of the Company’s interest rate swaps were linked to LIBOR, the Federal funds rate and the Secured Overnight Financing Rate, respectively. As of December 31, 2020, 17%, 72% and 11% of the Company’s interest rate swaps were linked to LIBOR, the Federal funds rate and the Secured Overnight Financing Rate, respectively.
(2) There were no forward starting swaps at September 30, 2021 and December 31, 2020.
(3) At September 30, 2021 and December 31, 2020, the weighted average years to maturity of payer interest rate swaps is offset by the weighted average years to maturity of receiver interest rate swaps. As such, the net weighted average years to maturity for each maturity bucket may fall outside of the range listed.






The following table presents swaptions outstanding at September 30, 2021 and December 31, 2020.
September 30, 2021
Current Underlying NotionalWeighted Average Underlying Fixed RateWeighted Average Underlying Floating RateWeighted Average Underlying Years to MaturityWeighted Average Months to Expiration
(dollars in thousands)
Long pay$4,050,0001.87%3M LIBOR10.1117.57
Long receive$2,000,0001.47%3M LIBOR11.2014.45
December 31, 2020
Current Underlying NotionalWeighted Average Underlying Fixed RateWeighted Average Underlying Floating RateWeighted Average Underlying Years to MaturityWeighted Average Months to Expiration
(dollars in thousands)
Long pay$8,050,0001.27%3M LIBOR10.405.42
Long receive$250,0001.66%3M LIBOR10.020.13

The following table summarizes certain characteristics of the Company’s TBA derivatives at September 30, 2021 and December 31, 2020:
September 30, 2021
Purchase and sale contracts for derivative TBAsNotionalImplied Cost BasisImplied Market ValueNet Carrying Value
(dollars in thousands)
Purchase contracts$23,201,000 $23,776,374 $23,622,635 $(153,739)
December 31, 2020
Purchase and sale contracts for derivative TBAsNotionalImplied Cost BasisImplied Market ValueNet Carrying Value
(dollars in thousands)
Purchase contracts$19,635,000 $20,277,088 $20,373,197 $96,109 
The following table summarizes certain characteristics of the Company’s futures derivatives at September 30, 2021 and December 31, 2020:
 
September 30, 2021
 Notional - Long
Positions		Notional - Short
Positions		Weighted Average
Years to Maturity
 (dollars in thousands)
U.S. Treasury futures - 2 year
$— $(1,067,000)2.00
U.S. Treasury futures - 5 year
— (3,274,000)4.41
U.S. Treasury futures - 10 year and greater
— (10,976,500)7.17
Total$— $(15,317,500)6.22
December 31, 2020
 Notional - Long
Positions		Notional - Short
Positions		Weighted Average
Years to Maturity
 (dollars in thousands)
U.S. Treasury futures - 5 year
— (1,240,000)4.40
U.S. Treasury futures - 10 year and greater
— (9,183,800)6.90
Total$— $(10,423,800)6.60
Offsetting of Derivative Assets and Liabilities The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset on our Consolidated Statements of Financial Condition at September 30, 2021 and December 31, 2020, respectively.
September 30, 2021
 Amounts Eligible for Offset 
 Gross AmountsFinancial InstrumentsCash CollateralNet Amounts
Assets(dollars in thousands)
Interest rate swaptions, at fair value$123,506 $— $— $123,506 
TBA derivatives, at fair value1,776 (1,659)— 117 
Futures contracts, at fair value199,728 (108)— 199,620 
Purchase commitments3,702 — — 3,702 
Credit derivatives2,683 — — 2,683 
Liabilities 
Interest rate swaps, at fair value$754,248 $— $(78,167)$676,081 
TBA derivatives, at fair value155,515 (1,659)(2,060)151,796 
Futures contracts, at fair value108 (108)— — 
Purchase commitments2,263 — — 2,263 
December 31, 2020
 Amounts Eligible for Offset 
 Gross AmountsFinancial InstrumentsCash CollateralNet Amounts
Assets(dollars in thousands)
Interest rate swaptions, at fair value$74,470 $— $— $74,470 
TBA derivatives, at fair value96,109 — — 96,109 
Futures contracts, at fair value506 (506)— — 
Purchase commitments49 — — 49 
Liabilities 
Interest rate swaps, at fair value$1,006,492 $— $(108,757)$897,735 
Futures contracts, at fair value19,413 (506)(18,907)— 
Credit derivatives7,440 — (7,440)— 
Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss
The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:
Location on Consolidated Statements of Comprehensive Income (Loss)
 Net Interest Component of Interest Rate SwapsRealized Gains (Losses) on Termination of Interest Rate SwapsUnrealized Gains (Losses) on Interest Rate Swaps
For the three months ended(dollars in thousands)
September 30, 2021$(54,411)$(1,196,417)$1,380,946 
September 30, 2020$(62,529)$(427)$170,327 
For the nine months ended
September 30, 2021$(217,245)$(1,196,417)$2,012,141 
September 30, 2020$(141,070)$(1,919,720)$(1,162,768)






The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:
Three Months Ended September 30, 2021
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives and Financial Instruments
(dollars in thousands)
Net TBA derivatives$155,569 $(182,845)$(27,276)
Net interest rate swaptions(24,265)(44,602)(68,867)
Futures(229,534)279,293 49,759 
Purchase commitments— 920 920 
Credit derivatives2,616 (2,320)296 
Total
$(45,168)
 
Three Months Ended September 30, 2020
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives and Financial Instruments
(dollars in thousands)
Net TBA derivatives$276,849 $(100,680)$176,169 
Net interest rate swaptions(9,836)3,263 (6,573)
Futures(19,989)10,337 (9,652)
Purchase commitments— (51)(51)
Credit derivatives1,531 7,892 9,423 
Total$169,316 
Nine Months Ended September 30, 2021
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$(122,275)$(249,847)$(372,122)
Net interest rate swaptions(69,262)28,528 (40,734)
Futures250,013 218,527 468,540 
Purchase commitments— 1,389 1,389 
Credit derivatives7,024 8,634 15,658 
Total$72,731 
Nine Months Ended September 30, 2020
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$798,459 $13,651 $812,110 
Net interest rate swaptions11,730 50,762 62,492 
Futures(299,220)(350)(299,570)
Purchase commitments— (1,194)(1,194)
Credit derivatives4,659 (31,839)(27,180)
Total$546,658