8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 2, 2015

CYS Investments, Inc.

(Exact name of Registrant as specified in its charter)

Maryland	001-33740	20-4072657
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

890 Winter Street, Suite 200

Waltham, Massachusetts 02451

(Address of principal executive offices)

(Registrant’s telephone number, including area code): (617) 639-0440

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure.

On June 2, 2015, CYS Investments, Inc. (the “Company”) announced that Kevin E. Grant, CFA, the Company’s CEO and President, will deliver a presentation at the KBW Mortgage Finance Conference at the Millennium Broadway Hotel in New York City at approximately 9:45 a.m. (ET). A copy of the presentation slides is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	CYS Investments, Inc. Presentation Slides, dated June 2, 2015

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CYS INVESTMENTS, INC.
Date: June 2, 2015	By:	/s/ Thomas A. Rosenbloom
		Thomas A. Rosenbloom
		Secretary

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	CYS Investments, Inc. Presentation Slides, dated June 2, 2015

EX-99.1

Investment Outlook

June 2015

Kevin E. Grant, CFA

Chief Executive Officer and President

KBW

Mortgage Finance Conference

June 2, 2015

Exhibit 99.1

Forward-Looking Statements

This

presentation

contains

forward-looking

statements,

within

the

meaning

of

Section

27A

of

the

Securities

Act

of

1933,

as

amended,

and

Section

21E

of

the

Securities

Exchange

Act

of

1934,

as

amended,

that

are

based

on

management’s

beliefs

and

assumptions,

current

expectations,

estimates

and

projections.

Such

statements,

including

information

relating

to

the

Company’s

expectations

for

distributions,

financing

from

the

Federal

Home

Loan

Bank,

availability

and

cost

of

financing,

liquidity,

counterparty

risk,

hedging,

volatility,

market

conditions,

monetary

policy,

the

yield

curve,

the

economy,

interest

expense,

affordability,

availability

and

valuation

of

housing

and

mortgages,

movements

in

interest

rates,

actions

by

the

U.S.

Government,

the

Federal

Reserve

and

other

government

entities,

the

performance

of

the

Company’s

target

assets,

the

impact

of

current

Federal

Reserve

voters

on

certain

policies

of

the

Federal

Reserve,

the

policy

views

of

central

banks,

and

the

size

of

the

mortgage

market

are

not

considered

historical

facts

and

are

considered

forward-looking

information

under

the

federal

securities

laws.

This

information

may

contain

words

such

as

“believes,”

“plans,”

“expects,”

“intends,”

“estimates”

or

similar

expressions.

This

information

is

not

a

guarantee

of

the

Company’s

future

performance

and

is

subject

to

risks,

uncertainties

and

other

important

factors

that

could

cause

the

Company’s

actual

performance

or

achievements

to

differ

materially

from

those

expressed

or

implied

by

this

forward-

looking

information

and

include,

without

limitation,

changes

in

the

market

value

and

yield

of

our

assets,

changes

in

interest

rates

and

the

yield

curve,

net

interest

margin,

return

on

equity,

availability

and

terms

of

financing

and

hedging,

the

likelihood

that

proposed

legislation

is

made

law

and

the

anticipated

impact

thereof,

actions

by

the

U.S.

government

or

any

agency

thereof,

including

the

Federal

Reserve,

and

the

effects

of

such

actions

and

various

other

risks

and

uncertainties

related

to

our

business

and

the

economy,

some

of

which

are

described

in

our

filings

with

the

SEC.

Given

these

uncertainties,

you

should

not

rely

on

forward-looking

information.

The

Company

undertakes

no

obligations

to

update

any

forward-looking

information,

whether

as

a

result

of

new

information,

future

events

or

otherwise.

2

CYS Overview

Focus on Cost

Efficiency

Target Assets

Agency Residential Mortgage Backed Securities

A Real Estate Investment Trust Formed

in January 2006

Extensive and

Diverse Sources of

Financing

Financing lines with 48

lenders

Swap agreements with 20

counterparties

Dividend Policy

Self managed: highly scalable

Senior

Management

Kevin Grant, CEO, President, Chairman

Frances Spark, CFO

Company intends to distribute all or substantially all of its REIT

taxable income

3

CYS Now Has Access to GSE

Financing

Access to Reliable, Low-Cost, Same-Day Funding

•

Term Range: Overnight to 30 years

•

Fixed or Floating Rate

•

Embedded Options

Enhances Liquidity Management

Diversifies Counterparty Risk

Expands REIT Hedging Limitations

Provides Financial Flexibility

4

5

Increased borrowing capacity improves liability management.

Fixed/Floating rates, amortizing structures, embedded options available out to 30 years.

Lowers hedging costs, expands REIT hedging limitations.

Financing across the curve enables a more closely matched book.

AAA/AA+ Rated, GSE Execution

Enhanced Liquidity

Compelling Economics

Lower Volatility

Counterparty Upgrade

Cincinnati FHLB Membership:

Compelling Economics + Flexibility = Strategic Advantage

Total FHLB Advances

1999 -

2013

3 Month Rates 

April 2007 -

December2009

$ in Millions

LIBOR

FHLB DNs

Treasury

Agency MBS

Market Continues To See Strong Demand

15 Year: Hedged vs. Unhedged

15 Year Fixed Hedged with Swaps: April 2009 –

May 2015

15 Year Hedged

(i)

15 Year Unhedged

(ii)

Borrow Short

Invest Long

May 29, 2015

Source:

Bloomberg.

6

Note: Spreads calculated as: (i) 15 year CC  Index  = 50% 4 year swap, and (ii) 15 year Current Coupon Index

Agency MBS

Market Continues To See Strong Demand

30 Year: Hedged vs. Unhedged

Source:

Bloomberg

30 Year Fixed Hedged with Swaps: April 2009 -

May 2015

30

Year Hedged 

30

Year Unhedged

May 29, 2015

Borrow Short

Invest Long

7

Note: Spread calculated as: (i) 30 year CC  Index  - 90% 5 year swap

•

Volatility in the Cap/Floor

Markets Hit a Low in July 2013

30 Yr

MBS -

15 Yr

MBS Spread

7 Yr

Cap/Floor Implied Vol

November

2012

–

May

2015

April

2012

–

May

2015

•

30 Year MBS

Have Cheapened

Meaningfully Relative to 15 Year

MBS

5 Year Swap vs. Fed Funds

January

2005

–

May

2015

Yield Curve

Creates positive carry

Very low cost of financing

Good ROE

Hedge flexibility very important

Fed still fighting deflation

End of QE Poses New Risks and New Opportunities

Source:

Bloomberg

May 29, 2015

May 29, 2015

May 29, 2015

8

Global Ten Year Yields:

Is U.S. Growth Out of Sync with Rest of World?

Source: Bloomberg, May 29, 2015

GDBR10

(1.646)

USGG10YR

(0.079)

GCAN10YR

(0.781)

GJGB10

(0.649)

GBTPGR10

(0.691)

Government Ten Year Yields

UK, US, Canada, Germany, Japan

August 2011 -

May 2015

August

2011

-

May

2015

9

Source: Board of Governors of the Federal Reserve, March 2015

Actual Economic Performance:

Sluggish vs. Fed Projections

10

Appropriate Timing

of Policy Firming

•

Creates Significant Headwinds for the Economy

•

Housing Will Struggle

•

Corporate Interest Expense will rise

Overview of FOMC Participants Assessments of

Appropriate Monetary Policy

Can the Economy Withstand the

Implied Path of 10 Year UST?

Transition to a Normalized Yield Curve:

Will

the

Fed

Push

Out

-

or

Pull

In

-

Forward

Rate

Guidance?

Ten Year Treasury

August 2011  -

May 2015

and Implied Projection

+25

-25

%

%

2015

2016

2017

1.0

2.0

3.0

4.0

5.0

0.0

1.5

2.5

3.5

4.5

0.5

Appropriate Pace

of Policy Firming

Target Fed Funds Rate at Year End

Longer Run

Source: Federal Reserve March 2015 Forecast, Bloomberg, CYS

11

2015-16 Fed Voters:

New Perspectives, Changing Outlooks 

Powell

Source: federalreserve.gov, Barclays, Macroeconomic Advisers, LLC,  Bank of America Merrill Lynch, Bloomberg, Wall Street Journal, Indiana University,  Marketwatch, Thomson Reuters, Federal Reserve

Bank of Atlanta, Federal Reserve Bank of Chicago, Federal Reserve Bank of Cleveland, Maryland Consumer Rights Coalition, Boston Globe, Businessweek, Newsweek, Washington Post, CNBC.

Hawkish

Dovish

Neutral

Yellen

Raskin’s

Successor

Board of

Governors

Fischer

Brainard

Tarullo

Stein’s

Successor

San Francisco:

Williams

2015

Voters

New York:

Dudley

Chicago:

Evans

Richmond:

Lacker

Atlanta:

Lockhart

2016

Voters

New York:

Dudley

Cleveland:

Mester

Boston:

Rosengren

Kansas City:

George

St. Louis:

Bullard

12

Central Banks:

Decidedly More Accommodative -

Focus on Global Deflation Risk

Draghi

EU

Hawkish

Dovish

Neutral

Xiaochuan

China

Xiaochuan

China

Tombini

Brazil

Tombini

Brazil

Australia

Stevens

Australia

Stevens

New Zealand

Wheeler

New Zealand

Wheeler

Kuroda

Japan

Canada

Poloz

Rajan

India

Kuroda

Japan

Carney

UK

Yellin

USA

13

GSE/Legislative Reform:

Stuck in the Mud

Source: Barclays, CYS

Legislative

Level of

GSE

Credit Risk

Proposal

Government Involvement

Implication

Sharing

Status

Corker-Warner Bill

Introduced 6/25/13

Limited: Only under

catastrophic scenarios where

losses on a pool of mortgages

exceeds 10%

Completely wound down over

5 years

10% first-loss piece is sold to

private entities

Corker-Warner under committee

discussion but not yet put to vote.

Either may become the front

runner from the Senate side but

both will likely have private capital

in the first loss place with several

mechanisms for risk sharing

Senate Banking Committee voted

in favor of the bill 13-9 on May 15,

2014. Insufficient support to allow

the bill to be brought to the Senate

floor for debate/vote.

Warren, Schumer did not support,

unlikely support under new Chair

Shelby.

Johnson -

Crapo Bill

Committee Vote 5/15/14

Based on Corker-Warner,

limited: only on scenarios

where losses on a pool of

mortgages exceeds a 10%

private loss position.

GSE’s

wound down over 5 year

period, replaced by FMIC.

Similar to Corker-Warner, 10%

first-loss piece is sold to

private entities.

PATH Act

Hensarling

Bill

Introduced 7/22/13

Very limited: dissolves the

GSEs completely and reduces

the scope of the FHA/VA

guarantee

Placed into receivership and

completely liquidated

Initially, a 10% risk-sharing

program on new GSE and FHA

business, although private

market securitization is

intended eventually to replace

GSEs

No news. In early 2013, the Path

Act seemed to be the clear front-

runner on the House side. Passage

of

bill

is

highly

unlikely.

The

final housing finance reform, if it

happens, could be a compromise

between the PATH Act and

whatever comes out of the Senate.

Delaney-Carney-Himes

HR

1491

Introduced

7/10/14

Limited: Ginnie Mae is required

to provide an explicit

government guarantee once

the 5% risk slice is eroded

when one of the private

monoline insurers defaults

GSEs will be slowly wound

down and eventually

converted into private

reinsurers with limited

capacities to take on

mortgage  credit risk

5% first-loss piece on each

new Ginnie

Mae securitization,

as well as a 10% pro-rata risk

slice on the top 95% of each

Ginnie

Mae securitization

Re-introduced

3/19/15.

Unlikely

to be

endorsed

under

Rep.

Hensarling

or

Sen.

Shelby

leadership.

14

Economic Recovery Below Normal Pace

U.S. Regular Conventional Gas Price

$ per gal

Updated: 2015-05-06

Capacity Utilization: Manufacturing

Updated: 2015-05-15

Civilian Unemployment Rate

Updated: 2015-05-08

CPI-U All Items

Updated: 2015-05-22

Total Nonfarm Private Payroll Employment

Updated: 2015-05-06

Total Unemployed

+ All Marginally Attached + Total

Employed Part Time for Economic Reasons

Updated: 2015-05-08

Source: Federal Reserve Bank of St. Louis

15

Housing Finance Has Not Rebounded

Source: U.S. Census Bureau and National Association of Realtors. St Louis Fed, www.census.gov

Share of Government Guaranteed Mortgages

1990 –

2013

%

Monthly Supply of Homes

January 1963-

present

Home Ownership Rate

January 1965-

present

(%)

16

Mortgage Market Shrinkage Likely to Continue

Residential Mortgage Debt Decline Driven By:

1.

Home prices now reset lower

2.

Delevering Consumers/Homeowners

3.

Psychology of lower leverage

4.

Low volume of new and existing home sales

5.

All-cash home purchase transactions, and higher downpayments

6.

Scheduled principal payments

7.

8.

QM Rules Restrictive

Single Family

Mortgage Origination Volume

2000-2016E

Mortgage Debt Outstanding

2007-2014

Source: http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm

Source: U.S Department of Housing and Urban Development and Federal Financial Institutions Examination Council. 2014, 2015 and 2016 data based on the March 2015 estimate of Freddie Mac’s Office of the Chief

Economist.

17

High percentage of cash-in refi’s versus cash-out refi’s.

Economics of Forward Purchase

18

Source: Bloomberg, May 29, 2015

CYS Common Stock Dividends

September 2009 –

March 2015

CYS Agency RMBS and U.S. Treasury Portfolio

1

Portfolio Composition and Dividends

1

As of

3/31/15

2

Annualized dividend yield is calculated using the stock price at the quarter end.

Note: the December 2012 dividend was composed of $0.40 quarterly cash dividend, and $0.52 special cash dividend.

$15.1B Agency RMBS and U.S. Treasuries Portfolio

Dividend

Special Dividend

Annualized

Dividend

Yield

(2)

19

Portfolio Characteristics

As of 3/31/15

(1) To-be-announced (“TBA”) securities are excluded from this calculation as they do not have a defined weighted-average loan

balance or age until mortgages have been assigned to the pool.

(2) Constant prepayment rate ("CPR") represents the 3-month CPR of the Company’s Agency RMBS held at March 31, 2015. The CPR

experienced by the Company’s Agency RMBS during the period may differ. Securities with no prepayment history are excluded from

this calculation.

(3) Duration measures the market price volatility of financial instruments as interest rates change, using Dollar Value of One Basis

Point, or “DV01”, methodology. We generally calculate duration using various third-party financial models and empirical data.

Different models and methodologies can produce different duration numbers for the same securities. Analytics provided by The

Yield Book® software.

(4) Represents the weighted-average coupon of Agency Hybrid ARMs.

CYS Agency RMBS and U.S. Treasury Portfolio Characteristics*

20

Financial Information

Income Statement

Core Earnings Reconciliation

21

Summary Financial Data

22

The table above includes calculations of the Company’s Agency RMBS and U.S. Treasury Securities portfolio (“Debt Securities”)

1. The average settled Debt Securities is calculated by averaging the month end cost basis of settled Debt Securities during the period.

2. The average total Debt Securities is calculated by averaging the month end cost basis of total Debt Securities during the period.

3. The average repurchase agreements and FHLB advances are calculated by averaging the month end repurchase agreements and FHLB advances balances during the period.

4. The average Debt Securities liabilities are calculated by adding the average month end repurchase agreements and FHLB advances balances plus average unsettled Debt Securities during the period.

5. The average stockholders' equity is calculated by averaging the month end stockholders' equity during the period.

6. The average common shares outstanding are calculated by averaging the daily common shares outstanding during the period.

7. The leverage ratio is calculated by dividing (i) the Company's repurchase agreements and FHLB advances balances plus payable for securities purchased minus receivable for securities sold by (ii) stockholders' equity.

8. The average yield on Debt Securities for the period is calculated by dividing total interest income by average settled Debt Securities.

9. The average yield on total Debt Securities including drop income for the period is calculated by dividing total interest income plus drop income by average total Debt Securities. Drop income was $14.1 million and $12.5 million

for the three months ended March 31, 2015 and December 31, 2014, respectively. Drop income is a component of our net realized and unrealized gain (loss) on investments on our consolidated statements of operations. Drop

income is the difference between the spot price and the forward settlement price for the same security on trade date. This difference is also the economic equivalent of the assumed net interest margin (yield minus financing costs)

of the bond from trade date to settlement date. We derive drop income through utilization of forward settling transactions.

10. The average cost of funds for the period is calculated by dividing repurchase agreement and FHLB advances interest expense by average repurchase agreements and FHLB advances for the period.

11. The average cost of funds and hedge for the period is calculated by dividing interest expense by average repurchase agreements and FHLB advances.

12. The adjusted average cost of funds and hedge for the period is calculated by dividing total interest expense by average total Debt Securities liabilities.

13. The interest rate spread net of hedge for the period is calculated by subtracting average cost of funds and hedge from average yield on settled Debt Securities.

14. The interest rate spread net of hedge including drop income for the period is calculated by subtracting adjusted average cost of funds and hedge from average yield on total Debt Securities including drop income.

15. The operating expense ratio for the period is calculated by dividing operating expenses by average stockholders' equity.

16. Calculated by change in book value plus dividend distributions on common stock.

*All percentages are annualized except total stockholder return on common equity.

Investment Outlook

June 2015

Kevin E. Grant, CFA

Chief Executive Officer and President

KBW

Mortgage Finance Conference

June 2, 2015