DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2022

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 June 30, 2022 and December 31, 2021:

Derivatives Instruments	June 30, 2022		December 31, 2021
Assets	(dollars in thousands)
Interest rate swaps	$	9,408	$	—
Interest rate swaptions	333,318		105,710
TBA derivatives	60,661		52,693
Futures contracts	341,430		9,028
Purchase commitments	3,615		1,779
Credit derivatives (1)	—		1,160
Total derivative assets	$	748,432	$	170,370
Liabilities
Interest rate swaps	$	272,055	$	747,036
TBA derivatives	91,124		3,916
Futures contracts	3,020		129,134
Purchase commitments	532		870
Credit derivatives (1)	12,977		581
Total derivative liabilities	$	379,708	$	881,537
(1) The maximum potential amount of future payments is the notional amount of credit derivatives in which the Company sold protection of $410.0 million and $400.0 million at June 30, 2022 and December 31, 2021, respectively, plus any coupon shortfalls on the underlying tranche. As of June 30, 2022 and December 31, 2021 the credit derivative tranches referencing the basket of bonds had a range of ratings between AAA and AA.

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s interest rate swaps at June 30, 2022 and December 31, 2021:

June 30, 2022
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	$	20,807,400	0.79	%	1.62	%	1.16
3 - 6 years	1,420,400		1.62	%	1.80	%	4.26
6 - 10 years	11,583,200		1.72	%	1.71	%	9.32
Greater than 10 years	1,411,000		3.88	%	1.39	%	19.11
Total / Weighted average	$	35,222,000	1.16	%	1.65	%	4.69
December 31, 2021
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	$	32,709,300	0.25	%	0.06	%	1.10
3 - 6 years	2,780,000		0.21	%	0.07	%	3.46
6 - 10 years	9,118,000		1.43	%	0.13	%	9.05
Greater than 10 years	1,300,000		4.04	%	0.11	%	18.70
Total / Weighted average	$	45,907,300	0.59	%	0.08	%	3.32
(1) As of June 30, 2022, 23%, 35% and 42% 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, 2021, 18%, 53% and 29% 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 June 30, 2022 and December 31, 2021. (3) At June 30, 2022 and December 31, 2021, 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 summarizes certain characteristics of the Company’s swaptions at June 30, 2022 and December 31, 2021:

June 30, 2022
	Current Underlying Notional	Weighted Average Underlying Fixed Rate	Weighted Average Underlying Floating Rate	Weighted Average Underlying Years to Maturity	Weighted Average Months to Expiration
(dollars in thousands)
Long pay	$4,050,000	2.00%	3M LIBOR	9.15	13.46
Long receive	$1,000,000	1.49%	3M LIBOR	11.20	14.46
December 31, 2021
	Current Underlying Notional	Weighted Average Underlying Fixed Rate	Weighted Average Underlying Floating Rate	Weighted Average Underlying Years to Maturity	Weighted Average Months to Expiration
(dollars in thousands)
Long pay	$4,050,000	2.00%	3M LIBOR	9.65	19.50
Long receive	$2,000,000	1.47%	3M LIBOR	10.95	11.38

The following table summarizes certain characteristics of the Company’s TBA derivatives at June 30, 2022 and December 31, 2021:

June 30, 2022
Purchase and sale contracts for derivative TBAs	Notional		Implied Cost Basis		Implied Market Value		Net Carrying Value
(dollars in thousands)
Purchase contracts	$	19,455,000	$	19,313,442	$	19,282,979	$	(30,463)
December 31, 2021
Purchase and sale contracts for derivative TBAs	Notional		Implied Cost Basis		Implied Market Value		Net Carrying Value
(dollars in thousands)
Purchase contracts	$	20,133,000	$	20,289,856	$	20,338,633	$	48,777

The following table summarizes certain characteristics of the Company’s futures derivatives at June 30, 2022 and December 31, 2021: 

June 30, 2022
	Notional - Long Positions		Notional - Short Positions		Weighted Average Years to Maturity
	(dollars in thousands)
U.S. Treasury futures - 2 year	$	—	$	(10,264,200)	1.97
U.S. Treasury futures - 5 year	—		(5,903,400)		4.40
U.S. Treasury futures - 10 year and greater	—		(19,832,600)		7.31
Total	$	—	$	(36,000,200)	5.31
December 31, 2021
	Notional - Long Positions		Notional - Short Positions		Weighted Average Years to Maturity
	(dollars in thousands)
U.S. Treasury futures - 2 year	$	—	$	(7,509,200)	1.96
U.S. Treasury futures - 5 year	—		(5,644,900)		4.38
U.S. Treasury futures - 10 year and greater	—		(9,381,000)		6.84
Total	$	—	$	(22,535,100)	4.60

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 in our Consolidated Statements of Financial Condition at June 30, 2022 and December 31, 2021, respectively.

June 30, 2022
			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments		Cash Collateral		Net Amounts
Assets	(dollars in thousands)
Interest rate swaps, at fair value	$	9,408	$	(5,195)	$	—	$	4,213
Interest rate swaptions, at fair value	333,318		—		—		333,318
TBA derivatives, at fair value	60,661		(32,631)		—		28,030
Futures contracts, at fair value	341,430		(3,020)		—		338,410
Purchase commitments	3,615		—		—		3,615
Liabilities
Interest rate swaps, at fair value	$	272,055	$	(5,195)	$	(13,910)	$	252,950
TBA derivatives, at fair value	91,124		(32,631)		—		58,493
Futures contracts, at fair value	3,020		(3,020)		—		—
Purchase commitments	532		—		—		532
Credit derivatives	12,977		—		(12,977)		—
December 31, 2021
			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments		Cash Collateral		Net Amounts
Assets	(dollars in thousands)
Interest rate swaptions, at fair value	$	105,710	$	—	$	—	$	105,710
TBA derivatives, at fair value	52,693		(3,876)		—		48,817
Futures contracts, at fair value	9,028		(9,028)		—		—
Purchase commitments	1,779		—		—		1,779
Credit derivatives	1,160		(516)		—		644
Liabilities
Interest rate swaps, at fair value	$	747,036	$	—	$	(77,607)	$	669,429
TBA derivatives, at fair value	3,916		(3,876)		(40)		—
Futures contracts, at fair value	129,134		(9,028)		(120,106)		—
Purchase commitments	870		—		—		870
Credit derivatives	581		(516)		(65)		—

Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss

The effect of interest rate swaps in the Consolidated Statements of Comprehensive Income (Loss) is as follows:

Location on Consolidated Statements of Comprehensive Income (Loss)
	Net Interest Component of Interest Rate Swaps (1)		Realized Gains (Losses) on Termination of Interest Rate Swaps (1)		Unrealized Gains (Losses) on Interest Rate Swaps (1)
For the three months ended	(dollars in thousands)
June 30, 2022	$	992	$	(16)	$	897,537
June 30, 2021	$	(83,087)	$	—	$	(141,067)
For the six months ended
June 30, 2022	$	(61,549)	$	(16)	$	2,220,976
June 30, 2021	$	(162,834)	$	—	$	631,195
(1) Included in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

The effect of other derivative contracts in the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Three Months Ended June 30, 2022
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Derivatives
(dollars in thousands)
Net TBA derivatives	$	(1,064,242)	$	280,992	$	(783,250)
Net interest rate swaptions	—		119,436		119,436
Futures	1,167,524		(380,436)		787,088
Purchase commitments	—		2,671		2,671
Credit derivatives	374		(9,189)		(8,815)
Total					$	117,130

Three Months Ended June 30, 2021
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Derivatives
(dollars in thousands)
Net TBA derivatives	$	10,045	$	275,226	$	285,271
Net interest rate swaptions	(22,787)		(232,860)		(255,647)
Futures	183,383		(577,899)		(394,516)
Purchase commitments	—		2,376		2,376
Credit derivatives	2,777		1,931		4,708
Total					$	(357,808)

Six Months Ended June 30, 2022
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives	$	(1,820,381)	$	(79,239)	$	(1,899,620)
Net interest rate swaptions	(14,450)		242,058		227,608
Futures	1,720,678		458,516		2,179,194
Purchase commitments	—		2,172		2,172
Credit derivatives	1,434		(12,528)		(11,094)
Total					$	498,260

Six Months Ended June 30, 2021
Derivative Instruments	Realized Gain (Loss)		Unrealized Gain (Loss)		Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives	$	(277,844)	$	(67,002)	$	(344,846)
Net interest rate swaptions	(44,997)		73,130		28,133
Futures	479,547		(60,766)		418,781
Purchase commitments	—		469		469
Credit derivatives	4,408		10,954		15,362
Total					$	117,899