10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 __________________________________

FORM 10-Q

 __________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission file number 001-33740

__________________________________

CYS Investments, Inc.

(Exact name of registrant as specified in its charter)

__________________________________

Maryland	20-4072657
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
890 Winter Street, Suite 200 Waltham, Massachusetts	02451
(Address of principal executive offices)	(Zip Code)

(617) 639-0440

(Registrant’s telephone number, including area code)

__________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 19, 2013
Common Stock ($0.01 par value)	172,792,521

__________________________________

Table of Contents

		Page
PART I.	Financial Information	1
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	47
PART II.	Other Information	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	48
Item 6.	Exhibits	48
	SIGNATURES	50

PART I. Financial Information

Item 1.         Financial Statements

CYS INVESTMENTS, INC.

CONDENSED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)

(In thousands, except per share numbers)	June 30, 2013			December 31, 2012*
ASSETS:
Investments in securities, at fair value (including pledged assets of $14,696,745 and $14,831,648, respectively)	$	17,218,204		$	20,861,718
Derivative assets, at fair value	365,067			124,169
Cash and cash equivalents	11,302			13,882
Receivable for securities sold and principal repayments	4,583,565			10,343
Interest receivable	44,212			46,558
Other assets	1,175			826
Total assets	22,223,525			21,057,496
LIABILITIES:
Repurchase agreements	13,809,319			13,981,307
Derivative liabilities, at fair value	54,242			98,575
Payable for securities purchased	6,126,222			4,515,501
Payable for cash received as collateral	106,742			28,910
Distribution payable	62,530			1,243
Accrued interest payable (including accrued interest on repurchase agreements of $3,293 and $11,717, respectively)	24,810			28,863
Accrued expenses and other liabilities	3,007			435
Total liabilities	20,186,872			18,654,834
Commitments and contingencies (note 6)	—			—
NET ASSETS	$	2,036,653		$	2,402,662
Net assets consist of:
Preferred Stock, $25.00 par value, 50,000 shares authorized:
Series A Cumulative Redeemable Preferred Stock, (3,000 and 3,000 shares issued and outstanding, respectively, $75,000 in aggregate liquidation preference)	$	72,369		$	72,369
Series B Cumulative Redeemable Preferred Stock, (8,000 and 0 shares issued and outstanding, respectively, $200,000 in aggregate liquidation preference)	193,550			—
Common Stock, $0.01 par value, 500,000 shares authorized (172,781 and 174,924 shares issued and outstanding, respectively)	1,728			1,749
Additional paid in capital	2,212,529			2,237,512
Retained earnings (accumulated deficit)	(443,523		)	91,032
NET ASSETS	$	2,036,653		$	2,402,662
NET ASSET VALUE PER COMMON SHARE	$	10.20		$	13.31

__________________

*    Derived from audited financial statements.

See notes to condensed financial statements.

1

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS

JUNE 30, 2013 (UNAUDITED)

INVESTMENTS IN SECURITIES – UNITED STATES OF AMERICA

(In thousands)	Face Amount		Fair Value
Fixed Income Securities - 845.4%(c)
Mortgage Pass-Through Agency RMBS - 845.1%(c)
Fannie Mae Pools - 730.9%(c)
2.15%, due 10/1/2042 - 2/1/2043 (a)(b)	$	136,770	$	137,321
2.18%, due 11/1/2042 (a)(b)	32,020		32,173
2.24%, due 10/1/2042 (a)(b)	48,609		49,214
2.26%, due 11/1/2042 (a)(b)	42,091		42,664
2.34%, due 11/1/2042 (a)(b)	70,341		71,090
2.37%, due 1/1/2043 (a)(b)	94,168		95,341
2.39%, due 10/1/2042 (a)(b)	21,463		21,738
2.40%, due 9/1/2042 (b)	35,425		35,912
2.41%, due 11/1/2042 (a)(b)	69,528		70,526
2.42%, due 9/1/2042 - 1/1/2043 (a)(b)	45,600		46,255
2.43%, due 7/1/2042 - 10/1/2042 (a)(b)	260,162		264,174
2.44%, due 6/1/2042 (a)(b)	50,724		51,536
2.45%, due 11/1/2042 (a)(b)	31,621		31,652
2.50%, due 5/1/2028	11,602		11,684
2.51%, due 10/1/2042 (a)(b)	132,173		134,624
2.59%, due 8/1/2042 (a)(b)	32,449		33,100
2.61%, due 4/1/2042 (a)(b)	33,452		34,159
2.70%, due 6/1/2042 (a)(b)	63,146		64,500
2.79%, due 4/1/2042 (a)(b)	147,912		151,537
2.80%, due 3/1/2042 - 11/1/2042 (a)(b)	178,379		181,394
2.81%, due 2/1/2042 (a)(b)	47,995		49,217
2.83%, due 2/1/2042 (a)(b)	28,908		29,670
2.85%, due 12/1/2041 (a)(b)	47,276		48,601
3.00%, due 2/1/2027 - 7/1/2028 (a)	4,155,940		4,282,349
3.00%, due 2/1/2032 - 1/1/2033 (a)	928,513		938,134
3.00%, due 12/1/2037 (a)	52,405		51,275
3.00%, due 10/1/2042 (a)	43,743		42,454
3.06%, due 9/1/2041 - 6/1/2042 (a)(b)	67,059		68,750
3.23%, due 3/1/2041 (a)(b)	13,518		14,038
3.35%, due 8/1/2041 (a)(b)	23,589		24,497
3.39%, due 5/1/2041 (a)(b)	15,846		16,555
3.50%, due 12/1/2025 - 5/1/2027 (a)	819,794		854,647
3.50%, due 6/1/2042 - 7/1/2043 (a)	5,025,914		5,110,687
3.99%, due 9/1/2039 (a)(b)	9,542		10,135
4.00%, due 1/1/2026 - 6/1/2026 (a)	403,289		425,298
4.00%, due 7/1/2043 - 8/1/2043	976,713		1,016,190
4.50%, due 4/1/2030 - 11/1/2030 (a)	99,541		106,208
4.50%, due 11/1/2041 (a)	222,852		236,114
Total Fannie Mae Pools	14,520,072		14,885,413
Freddie Mac Pools - 109.0%(c)
2.19%, due 2/1/2043 (a)(b)	29,578		29,675
2.22%, due 12/1/2042 (a)(b)	47,795		48,060

2

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS - (Continued)

JUNE 30, 2013 (UNAUDITED)

	Face Amount		Fair Value
2.29%, due 11/1/2042 (a)(b)	$	96,202	$	96,962
2.43%, due 6/1/2042 (a)(b)	36,825		37,474
2.44%, due 4/1/2043 (a)(b)	30,797		30,541
2.45%, due 7/1/2042 (a)(b)	42,250		42,979
2.53%, due 11/1/2042 (a)(b)	43,636		44,502
2.54%, due 7/1/2042 (a)(b)	36,475		37,214
2.56%, due 2/1/2043 (a)(b)	118,113		118,529
2.57%, due 2/1/2043 (a)(b)	47,704		47,898
2.59%, due 3/1/2042 (a)(b)	31,610		32,399
2.79%, due 12/1/2041 (a)(b)	37,984		38,911
3.32%, due 1/1/2041 (a)(b)	31,882		33,373
3.50%, due 4/1/2026 - 2/1/2027 (a)	149,316		155,127
3.50%, due 5/1/2043 - 6/1/2043 (a)	1,061,638		1,077,341
3.50%, due 7/1/2043	300,000		303,844
4.50%, due 12/1/2024 (a)	12,804		13,481
4.50%, due 2/1/2025 - 5/1/2025 (a)	29,562		31,154
Total Freddie Mac Pools	2,184,171		2,219,464
Ginnie Mae Pools - 5.2%(c)
3.50%, due 7/20/2040 (a)(b)	89,988		95,108
4.00%, due 1/20/2040 (a)(b)	10,613		11,274
Total Ginnie Mae Pools	100,601		106,382
Total Mortgage Pass-Through Agency RMBS (Cost - $17,531,518)	16,804,844		17,211,259
Other investments (Cost - $6,945)(d) - 0.3%(c)	6,945		6,945
Total Investments in Securities (Cost - $17,538,463)	$	16,811,789	$	17,218,204

Interest Rate Cap Contracts - 14.2%(c)
Expiration	Cap Rate		Notional Amount		Fair Value
10/15/2015	1.43	%	$	300,000	$	570
11/8/2015	1.36	%	200,000		461
5/23/2019	2.00	%	300,000		12,871
6/1/2019	1.75	%	300,000		14,595
6/29/2019	1.50	%	300,000		17,175
7/2/2019	1.50	%	300,000		17,008
7/16/2019	1.25	%	500,000		31,481
3/26/2020	1.25	%	500,000		39,588
3/30/2020	1.25	%	700,000		56,084
5/20/2020	1.25	%	500,000		41,071
7/25/2022	1.75	%	500,000		57,551
Total Interest Rate Cap Contracts (Cost, $181,083)			$	4,400,000	$	288,455

3

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS - (Continued)

JUNE 30, 2013 (UNAUDITED)

Interest Rate Swap Contracts - (1.1%)(c)(e)
Expiration	Pay Rate		Notional Amount		Fair Value
7/15/2013	1.37	%	$	300,000	$	(127	)
12/15/2013	1.31	%	400,000		(1,881		)
12/16/2013	1.28	%	500,000		(2,246		)
12/16/2013	1.26	%	400,000		(1,798		)
12/17/2013	1.32	%	400,000		(1,883		)
7/1/2014	1.72	%	100,000		(1,361		)
7/16/2014	1.73	%	250,000		(3,561		)
8/16/2014	1.35	%	200,000		(2,209		)
9/23/2014	1.31	%	500,000		(5,716		)
10/6/2014	1.17	%	240,000		(2,368		)
2/14/2015	2.15	%	500,000		(13,902		)
6/2/2016	1.94	%	300,000		(10,045		)
12/19/2016	1.43	%	250,000		(3,735		)
4/24/2017	1.31	%	500,000		(3,410		)
7/13/2017	0.86	%	750,000		10,627
9/6/2017	0.77	%	250,000		5,077
9/6/2017	0.77	%	250,000		5,104
9/6/2017	0.77	%	500,000		9,962
11/29/2017(f)	0.87	%	500,000		11,482
2/21/2018	1.02	%	500,000		9,332
2/27/2018	0.96	%	500,000		11,112
4/25/2018(g)	1.01	%	500,000		13,916
Interest Rate Swap Contracts (Cost, $0)			$	8,590,000	$	22,370

__________________

LEGEND

(a) Securities or a portion of the securities are pledged as collateral for repurchase agreements, interest rate swap contracts, or forward settling transactions.

(b) The coupon rate shown on floating or adjustable rate securities represents the rate at June 30, 2013.

(c) Percentage of net assets.

(d) Comprised of investments that were individually less than 1% of net assets.

(e) The Company’s interest rate swap contracts receive a floating rate set quarterly to three month LIBOR.

(f) The interest rate swap effective date is November 29, 2013 and does not accrue any income or expense until that date.

(g) The interest rate swap effective date is April 25, 2014 and does not accrue any income or expense until that date.

See notes to condensed financial statements.

4

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS - (Continued)

DECEMBER 31, 2012 (UNAUDITED)*

INVESTMENTS IN SECURITIES – UNITED STATES OF AMERICA

(In thousands)	Face Amount		Fair Value
Fixed Income Securities - 868.3%(c)
Mortgage Pass-Through Agency RMBS - 865.9%(c)
Fannie Mae Pools - 822.8%(c)
2.15%, due 2/1/2043(b)	$	100,000	$	103,991
2.16%, due 10/1/2042(b)	44,800		46,452
2.17%, due 3/1/2043(b)	30,000		31,167
2.18%, due 11/1/2042(b)	34,926		36,246
2.24%, due 10/1/2042(b)	49,605		51,511
2.26%, due 11/1/2042(b)	45,372		47,149
2.34%, due 11/1/2042(b)	75,085		78,162
2.38%, due 1/1/2043(a)(b)	100,237		104,444
2.40%, due 9/1/2042 - 10/1/2042(a)(b)	63,216		65,915
2.41%, due 7/1/2042 - 9/1/2042(a)(b)	69,629		72,585
2.42%, due 11/1/2042(a)(b)	75,395		78,710
2.43%, due 2/1/2043(b)	25,000		26,174
2.44%, due 7/1/2042 - 10/1/2042(a)(b)	241,204		251,833
2.45%, due 10/1/2042 - 11/1/2042(b)	87,021		90,808
2.46%, due 6/1/2042(a)(b)	57,508		60,021
2.50%, due 2/1/2028 - 3/1/2028	1,900,000		1,985,203
2.51%, due 10/1/2042(a)(b)	146,723		153,519
2.57%, due 7/1/2042 - 2/1/2043(a)(b)	130,372		136,513
2.58%, due 8/1/2042(a)(b)	34,217		35,801
2.60%, due 2/1/2043(b)	50,000		52,406
2.62%, due 7/1/2042(a)(b)	46,138		48,256
2.63%, due 4/1/2042(a)(b)	35,609		37,264
2.70%, due 6/1/2042(a)(b)	67,729		70,933
2.79%, due 1/1/2042 - 3/1/2042(a)(b)	85,732		89,912
2.80%, due 2/1/2042 - 11/1/2042(a)(b)	349,671		366,718
2.81%, due 2/1/2042(a)(b)	55,367		58,090
2.84%, due 2/1/2042(a)(b)	32,607		34,247
2.85%, due 12/1/2041(a)(b)	53,238		55,952
2.87%, due 1/1/2042(a)(b)	59,639		63,234
2.89%, due 2/1/2042(a)(b)	40,377		42,409
3.00%, due 1/1/2041(a)(b)	29,557		31,002
3.00%, due 2/1/2027 - 12/1/2027(a)	6,794,861		7,183,772
3.00%, due 2/1/2032 - 2/1/2033(a)	967,503		1,018,411
3.00%, due 10/1/2042(a)	46,277		47,556
3.02%, due 12/1/2040(a)(b)	101,591		106,680
3.04%, due 9/1/2041(a)(b)	38,752		40,639
3.05%, due 9/1/2041(a)(b)	36,363		38,205
3.06%, due 6/1/2042(b)	37,791		40,031
3.16%, due 9/1/2041(a)(b)	31,611		33,343
3.18%, due 11/1/2041(a)(b)	27,672		29,179
3.21%, due 9/1/2041(a)(b)	84,111		88,670

5

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS - (Continued)

DECEMBER 31, 2012 (UNAUDITED)*

	Face Amount		Fair Value
3.24%, due 3/1/2041(a)(b)	$	15,547	$	16,389
3.26%, due 4/1/2041(a)(b)	38,941		40,970
3.30%, due 5/1/2041(a)(b)	31,843		33,499
3.35%, due 8/1/2041(a)(b)	27,024		28,827
3.36%, due 6/1/2041(a)(b)	81,763		86,263
3.38%, due 5/1/2041(a)(b)	17,894		18,822
3.50%, due 7/1/2021(a)	207,091		219,747
3.50%, due 12/1/2025 - 2/1/2028(a)	1,481,478		1,572,774
3.50%, due 8/1/2042 - 3/1/2043(a)	3,209,041		3,425,338
3.61%, due 6/1/2041(a)(b)	49,197		52,170
3.65%, due 7/1/2040(a)(b)	29,174		30,810
3.99%, due 9/1/2039(b)	11,717		12,432
4.00%, due 1/1/2025 - 6/1/2026(a)	613,772		657,599
4.00%, due 8/1/2042(a)	106,594		114,664
4.50%, due 2/1/2028 - 11/1/2030(a)	136,333		147,730
4.50%, due 11/1/2041(a)	256,057		277,486
Total Fannie Mae Pools	18,695,972		19,768,633
Freddie Mac Pools - 38.0%(c)
2.22%, due 12/1/2042(b)	50,184		52,100
2.30%, due 11/1/2042(a)(b)	99,093		103,022
2.43%, due 6/1/2042(a)(b)	38,618		40,336
2.45%, due 7/1/2042(a)(b)	46,980		49,027
2.52%, due 9/1/2042(a)(b)	122,825		128,547
2.54%, due 7/1/2042(a)(b)	41,200		43,077
2.55%, due 11/1/2042(b)	54,278		56,826
2.59%, due 3/1/2042(a)(b)	35,421		37,203
2.79%, due 12/1/2041(a)(b)	42,260		44,357
3.27%, due 6/1/2041(a)(b)	32,330		33,995
3.30%, due 1/1/2041(a)(b)	35,460		37,608
3.50%, due 4/1/2026 - 2/1/2027(a)	187,349		197,014
3.63%, due 6/1/2041(a)(b)	32,394		34,105
4.50%, due 12/1/2024 - 5/1/2025(a)	52,637		56,006
Total Freddie Mac Pools	871,029		913,223
Ginnie Mae Pools - 5.1%(c)
3.50%, due 7/20/2040(a)(b)	101,626		108,469
4.00%, due 1/20/2040(a)(b)	12,875		13,818
Total Ginnie Mae Pools	114,501		122,287
Total Mortgage Pass-Through Agency RMBS (Cost - $20,560,760)	19,681,502		20,804,143
U.S. Treasury Bills - 1.6%(c)
0.06%, due 2/7/2013(a)(d)	38,000		37,999
Total U.S. Treasury Bills (Cost - $37,995)	$	38,000	$	37,999
Other investments (Cost - $12,855)(e) - 0.8%(c)	20,473		19,576
Total Investments in Securities (Cost - $20,611,610)	$	19,739,975	$	20,861,718

6

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS - (Continued)

DECEMBER 31, 2012 (UNAUDITED)*

Interest Rate Cap Contracts - 5.1%(c)
Expiration	Cap Rate		Notional Amount		Fair Value
12/30/2014	2.07	%	$	200,000	$	38
10/15/2015	1.43	%	300,000		386
11/8/2015	1.36	%	200,000		302
5/23/2019	2.00	%	300,000		6,714
6/1/2019	1.75	%	300,000		7,553
6/29/2019	1.50	%	300,000		8,686
7/2/2019	1.50	%	300,000		9,165
7/16/2019	1.25	%	500,000		17,255
7/16/2022	1.75	%	500,000		36,010
7/25/2022	1.75	%	500,000		36,880
Total Interest Rate Cap Contracts (Cost, $134,815)			$	3,400,000	$	122,989

Interest Rate Swap Contracts - (4.1%)(c)(f)
Expiration	Pay Rate		Notional Amount		Fair Value
5/26/2013	1.60	%	$	100,000	$	(529	)
6/28/2013	1.38	%	300,000		(1,574		)
7/15/2013	1.37	%	300,000		(1,706		)
12/15/2013	1.31	%	400,000		(3,773		)
12/16/2013	1.26	%	400,000		(3,602		)
12/16/2013	1.28	%	500,000		(4,581		)
12/17/2013	1.32	%	400,000		(3,838		)
7/1/2014	1.72	%	100,000		(2,049		)
7/16/2014	1.73	%	250,000		(5,309		)
8/16/2014	1.35	%	200,000		(3,246		)
9/23/2014	1.31	%	500,000		(8,167		)
10/6/2014	1.17	%	240,000		(3,405		)
2/14/2015	2.15	%	500,000		(18,564		)
6/2/2016	1.94	%	300,000		(14,320		)
12/19/2016	1.43	%	250,000		(7,996		)
4/24/2017(g)	1.31	%	500,000		(11,556		)
7/13/2017	0.86	%	750,000		(4,117		)
9/6/2017	0.77	%	250,000		33
9/6/2017	0.77	%	250,000		26
9/6/2017	0.77	%	500,000		(243		)
11/29/2017(h)	0.87	%	500,000		1,121
Interest Rate Swap Contracts (Cost, $0)			$	7,490,000	$	(97,395	)

__________________

LEGEND

* Derived from audited financial statements.

(a) Securities or a portion of the securities are pledged as collateral for repurchase agreements, interest rate swap contracts or forward settling transactions.

(b) The coupon rate shown on floating or adjustable rate securities represents the rate at December 31, 2012.

(c) Percentage of net assets.

(d) Zero coupon bond, rate shown represents purchase yield.

(e) Comprised of investments that were individually less than 1% of net assets.

(f) The Company’s interest rate swap contracts receive a floating rate set quarterly to three month LIBOR.

7

CYS INVESTMENTS, INC.

CONDENSED SCHEDULES OF INVESTMENTS - (Continued)

DECEMBER 31, 2012 (UNAUDITED)*

(g) The interest rate swap effective date is April 24, 2013 and does not accrue any income or expense until that date.

(h) The interest rate swap effective date is November 29, 2013 and does not accrue any income or expense until that date.

See notes to condensed financial statements.

8

CYS INVESTMENTS, INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share numbers)	2013			2012			2013			2012
INVESTMENT INCOME:
Interest income from Agency RMBS	$	80,991		$	70,352		$	153,092		$	134,499
Other income	560			1,395			1,560			2,617
Total investment income	81,551			71,747			154,652			137,116
EXPENSES:
Interest	14,047			8,993			29,078			15,846
Compensation and benefits	3,425			3,346			6,745			6,510
General, administrative and other	2,246			1,933			4,479			3,888
Total expenses	19,718			14,272			40,302			26,244
Net investment income	61,833			57,475			114,350			110,872
GAINS AND (LOSSES) FROM INVESTMENTS:
Net realized gain (loss) on investments	(211,418		)	61,113			(164,738		)	66,286
Net unrealized appreciation (depreciation) on investments	(444,877		)	7,473			(570,368		)	35,450
Net gain (loss) from investments	(656,295		)	68,586			(735,106		)	101,736
GAINS AND (LOSSES) FROM SWAP AND CAP CONTRACTS:
Net swap and cap interest income (expense)	(26,699		)	(12,687		)	(48,655		)	(24,193		)
Net gain (loss) on termination of swap and cap contracts	7,329			—			15,959			—
Net unrealized appreciation (depreciation) on swap and cap contracts	215,546			(11,669		)	238,963			(17,592		)
Net gain (loss) from swap and cap contracts	196,176			(24,356		)	206,267			(41,785		)
NET INCOME (LOSS)	$	(398,286	)	$	101,705		$	(414,489	)	$	170,823
DIVIDENDS ON PREFERRED STOCK	(3,995		)	—			(5,448		)	—
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES	$	(402,281	)	$	101,705		$	(419,937	)	$	170,823
NET INCOME (LOSS) PER COMMON SHARE BASIC & DILUTED	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54

See notes to condensed financial statements.

9

CYS INVESTMENTS, INC.

CONDENSED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

(In thousands)	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
Net income (loss):
Net investment income	$	61,833		$	114,350
Net realized gain (loss) on investments	(211,418		)	(164,738		)
Net unrealized appreciation (depreciation) on investments	(444,877		)	(570,368		)
Net gain (loss) from swap and cap contracts	196,176			206,267
Net income (loss)	(398,286		)	(414,489		)
Dividends on preferred stock	(3,995		)	(5,448		)
Net income (loss) available to common shares	(402,281		)	(419,937		)
Capital transactions:
Net proceeds (payments) from issues and repurchase of common shares	(18,843		)	(26,672		)
Net proceeds from issuance of preferred shares	193,550			193,550
Distributions to common stockholders	(58,746		)	(114,618		)
Amortization of share based compensation	897			1,668
Increase (decrease) in net assets from capital transactions	116,858			53,928
Total increase (decrease) in net assets	(285,423		)	(366,009		)
Net assets:
Beginning of period	2,322,076			2,402,662
End of period	$	2,036,653		$	2,036,653

See notes to condensed financial statements.

10

CYS INVESTMENTS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
(In thousands)	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(414,489	)	$	170,823
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Purchase of investment securities	(27,414,434		)	(11,560,000		)
Premium paid on interest rate caps	(91,860		)	(44,070		)
Proceeds from disposition of investment securities	28,608,802			5,730,437
Proceeds from termination of interest rate swap and cap contracts	50,113			—
Proceeds from paydowns of investment securities	1,632,498			1,194,916
Amortization of share based compensation	1,668			1,398
Amortization of premiums and discounts on investment securities	81,542			39,576
Amortization of premiums on interest rate cap contracts	11,438			2,434
Net realized (gain) loss on investments	164,738			(66,286		)
Net (gain) loss on termination of swap and cap contracts	(15,959		)	—
Net unrealized (appreciation) depreciation on investments	570,368			(35,450		)
Net unrealized (appreciation) depreciation on swap and cap contracts	(238,963		)	17,592
Change in assets and liabilities:
Receivable for securities sold and principal repayments	(4,573,222		)	(360,033		)
Interest receivable	2,346			(7,657		)
Other assets	(349		)	(331		)
Payable for securities purchased	1,610,721			2,594,998
Payable for cash received as collateral	77,832			—
Accrued interest payable	(4,053		)	79
Accrued expenses and other liabilities	2,572			1,773
Net cash provided by (used in) operating activities	61,309			(2,319,801		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements	70,519,523			34,953,941
Repayments of repurchase agreements	(70,691,511		)	(33,071,442		)
Net proceeds (payments) from issuance and repurchase of common shares	(26,672		)	497,709
Net proceeds from issuance of preferred stock	193,550			—
Distributions paid	(58,779		)	(58,069		)
Net cash provided by (used in) financing activities	(63,889		)	2,322,139
Net increase (decrease) in cash and cash equivalents	(2,580		)	2,338
CASH AND CASH EQUIVALENTS - Beginning of period	13,882			11,508
CASH AND CASH EQUIVALENTS - End of period	$	11,302		$	13,846
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	70,236		$	43,535
SUPPLEMENTAL DISCLOSURES OF NONCASH FLOW INFORMATION:
Distributions declared, not yet paid	$	62,530		$	59,465

See notes to condensed financial statements.

11

CYS INVESTMENTS, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION

CYS Investments, Inc. (the “Company”) was formed as a Maryland corporation on January 3, 2006, and commenced operations on February 10, 2006. The Company has elected to be taxed and intends to continue to qualify as a real estate investment trust (“REIT”) and is required to comply with the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), with respect thereto. Since March 2008, the Company has primarily purchased residential mortgage-backed securities that are issued and the principal and interest of which are guaranteed by a federally chartered corporation (“Agency RMBS”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government such as the Government National Mortgage Association (“Ginnie Mae”), or U.S. Treasuries securities. On December 10, 2012 the Company's board of directors amended and restated its investment guidelines to permit the company to invest in (i) Agency RMBS, (ii) collateralized mortgage obligations issued by a government agency or government-sponsored entity that are collateralized by Agency RMBS and (iii) debt securities issued by the United States Department of Treasury ("U.S. Treasury Securities") or a government sponsored entity that is not backed by collateral but, in the case of government agencies, is backed by the full faith and credit of the U.S. government, and, in the case of government sponsored entities, is backed by the integrity and creditworthiness of the issuer (“US Agency Debentures”). The Company’s common stock, Series A Cumulative Redeemable Preferred Stock, $25.00 liquidation preference (the "Series A Preferred Stock"), and Series B Cumulative Redeemable Preferred Stock, $25.00 liquidation preference (the "Series B Preferred Stock"), trade on the New York Stock Exchange under the symbols “CYS,” "CYS PrA" and "CYS PrB," respectively.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2012, included in the annual report on Form 10-K. The results for interim periods are not necessarily indicative of the results to be expected for the fiscal year.

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Clarification of the Scope of Audit and Accounting Guide Investment Companies (“ASC 946”), prior to its deferral in February 2008. Under ASC 946, the Company uses financial reporting for investment companies.

Segment Reporting

The Company operates as a single segment reporting to the Chief Executive Officer, who manages the entire investment portfolio.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those management estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash held in banks and highly liquid investments with original maturities of three months or less. Interest income earned on cash and cash equivalents is recorded in other income.

Interest Rate Swap and Cap Contracts

The Company utilizes interest rate swaps and caps to hedge the interest rate risk associated with the financing of its portfolio. Specifically, the Company seeks to hedge the exposure to potential interest rate mismatches between the interest earned on investments and the borrowing costs caused by fluctuations in short term interest rates. In a simple interest rate swap, one investor pays a floating rate of interest on a notional principal amount and receives a fixed rate of interest on the same notional principal amount for a specified period of time. Alternatively, an investor may pay a fixed rate and receive a floating rate. In a simple interest rate cap, one investor pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). If the floating interest rate (the “floating rate”) exceeds the cap rate, the investor receives a payment from the

12

cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. Alternatively, an investor may receive a premium and pay the difference in cap rate and floating rate.

During the term of the interest rate swap or cap, the Company makes or receives periodic payments and unrealized gains or losses are recorded as a result of marking the swap and cap to their fair value. When the swap or cap is terminated, the Company records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company’s cost basis in the contract, if any. The periodic payments, amortization of premiums on cap contracts and any realized or unrealized gains or losses are reported under gains and losses from swap and cap contracts in the statements of operations. Swaps involve a risk that interest rates will move contrary to the Company’s expectations, thereby increasing the Company’s payment obligation.

Because the Company uses financial reporting for investment companies, its investments, including its interest rate swap and cap contracts, are carried at fair value with changes in fair value included in earnings. Consequently, there would be no impact to designating interest rate swaps and caps as cash flow or fair value hedges under GAAP.

The Company's interest rate swap and cap contracts are subject to master netting arrangements. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the swap or cap limited to the fair value of collateral posted in excess of the fair value of the contract. As of June 30, 2013 and December 31, 2012, the Company did not anticipate nonperformance by any counterparty. Should interest rates move unexpectedly, the Company may not achieve the anticipated benefits of the interest rate swap or cap and may realize a loss.

Investment Valuation

The Company has established a pricing committee responsible for establishing valuation policies and procedures as well as approving valuations on a monthly basis at a pricing meeting. The pricing committee is made up of individuals from the accounting team, the investment team and senior management.

Agency RMBS, Agency Debentures and U.S. Treasury securities are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security.

Interest rate swaps and caps are generally valued using valuations provided by broker quotations. Such broker quotations are based on the present value of fixed and projected floating rate cash flows over the term of the swap contract. Future cash flows are discounted to their present value using swap rates provided by electronic data services or by broker.

Fair values of long-lived assets, including real estate, are primarily derived internally and are based on observed sales transactions for similar assets. For real estate, fair values are based on discounted cash flow estimates which reflect current and projected lease profiles and available industry information about capitalization rates and expected trends in rents and occupancy.  

All valuations received from third party pricing services or broker quotes are non-binding. The Company does not adjust any of the prices received from third party pricing services or brokers, and all prices are reviewed by the Company. This review includes comparisons of similar market transactions, alternative third party pricing services and broker quotes, or comparisons to a pricing model. To ensure the proper fair value hierarchy, the Company reviews the third party pricing service’s methodology to understand whether observable or unobservable inputs are being used.

Agency RMBS

The Company’s investments in Agency RMBS consist of pass-through certificates backed by fixed rate, monthly reset adjustable-rate loans (“ARMs”) and hybrid ARMs, the principal and interest of which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Hybrid ARMs have interest rates that have an initial fixed period (typically three, five, seven or ten years) and thereafter reset at regular intervals in a manner similar to ARMs.

Forward Settling Transactions

The Company engages in forward settling transactions to purchase certain securities. The Company records forward settling transactions on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment on the settlement date for the securities purchased. Securities purchased on a forward settling basis are carried at fair value and only begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract. Among other forward settling transactions, the Company from time to time transacts in to-be-announced securities (“TBAs”). As with other forward settling transactions, a seller agrees to issue TBAs at a future date. However, the seller does not specify the particular securities to be delivered.

13

Instead, the Company agrees to accept any security that meets specified terms such as issuer, interest rate and terms of underlying mortgages. The Company records TBAs on the trade date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are carried at fair value and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages received may be less favorable than those anticipated by the Company.

As of June 30, 2013 and December 31, 2012, the Company had pledged Agency RMBS with a fair value of $116.4 million and $10.4 million, respectively, on its open forward settling transactions.

Repurchase Agreements

Repurchase agreements are borrowings that are collateralized by the Company’s Agency RMBS and are carried at their amortized cost, which approximates their fair value due to their short term nature, generally 30-90 days. The Company’s repurchase agreement counterparties are large institutional dealers in fixed income securities. Collateral is valued daily and counterparties may require additional collateral when appropriate. Counterparties have the right to sell or repledge collateral pledged for repurchase agreements.

Investment Transactions and Income

The Company records its transactions in securities on a trade date basis. Realized gains and losses on securities transactions are recorded on an identified cost basis. Interest income and expense are recorded on the accrual basis. Interest income on Agency RMBS and Agency Debentures is accrued based on outstanding principal amount of the securities and their contractual terms. Interest on collateralized loan obligations ("CLOs") is accrued at a rate determined based on estimated future cash flows and adjusted prospectively as future cash flow amounts are recast. For CLOs placed on nonaccrual status or when the Company cannot reliably estimate cash flows, the cost recovery method is used. Amortization of premium and accretion of discount are recorded using the yield to maturity method, and are included in investment income in the statements of operations. The Company does not estimate prepayments when calculating the yield to maturity. The amount of premium or discount associated with a prepayment is recorded through investment income on the statements of operations as they occur.

Compensation and Benefits

Included in the Company’s compensation and benefits are salaries, incentive compensation, benefits, share based compensation and the expense relating to restricted stock granted to non-employees (prior to the internalization of the Company's management, which became effective on September 1, 2011). The Company accounts for share based compensation using the fair value based methodology prescribed by ASC 718, Share-Based Payment (“ASC 718”). Compensation cost related to restricted common stock issued is measured at its estimated fair value at the grant date and recognized as expense over the vesting period.

Income Taxes

The Company has elected to be taxed as a REIT and intends to continue to comply with provisions of the Code with respect thereto. As a REIT, the Company generally will not be subject to federal or state income tax on income that it currently distributes to its stockholders. To maintain its qualification as a REIT, the Company must distribute at least 90% of its REIT taxable income to its stockholders and meet certain other tests relating to assets and income.

Earnings Per Share (“EPS”)

Basic EPS is computed using the two class method by dividing net income (loss), after adjusting for the impact of unvested stock awards deemed to be participating securities, by the weighted average number of common shares outstanding calculated excluding unvested stock awards. Diluted EPS is computed by dividing net income (loss), after adjusting for the impact of unvested stock awards deemed to be participating securities, by the weighted average number of common shares outstanding calculated excluding unvested stock awards, giving effect to common stock options and warrants, if they are not anti-dilutive. See Note 3 for EPS computations.

Recent Accounting Pronouncements

In June 2013, the FASB issued ASU 2013-08, Financial Services-Investment Companies (Topic 946). This update modifies the guidance for Topic 946 for determining whether an entity is an investment company for GAAP purposes. It requires entities that adopted Statement of Position 07-1 prior to its deferral to reassess whether they continue to meet the definition of an investment company for GAAP purposes. The guidance is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with retrospective application. Earlier application is prohibited. Management has performed its reassessment and has determined that the Company does not meet the definition of an investment company in accordance with ASC 946 and as a result will need to select and apply other appropriate accounting principles which will change the presentation of the Company's financial statements effective January 1, 2014. Management is still assessing the

14

impact on the Company's financial statements and currently does not expect there will be a material effect on the Company's financial position or results of operations.

In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues about ASU 2011-11 and applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The guidance was effective January 1, 2013 and was applied retrospectively. This guidance does not amend the circumstances in which the Company offsets its derivative positions. As a result, the guidance does not have a material effect on the Company's financial statements.

3. EARNINGS PER SHARE

Components of the computation of basic and diluted EPS were as follows (in thousands except per share numbers):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income (loss)	$	(398,286	)	$	101,705		$	(414,489	)	$	170,823
Less preferred stock dividends	(3,995		)	—			(5,448		)	—
Net income (loss) available to common shares	(402,281		)	101,705			(419,937		)	170,823
Less dividends paid:
Common shares	(58,442		)	(59,087		)	(114,029		)	(116,779		)
Unvested shares	(304		)	(378		)	(589		)	(755		)
Undistributed earnings (loss)	(461,027		)	42,240			(534,555		)	53,289
Basic weighted average shares outstanding:
Common shares	173,252			116,126			173,693			110,039
Basic earnings (loss) per common share:
Distributed earnings	$	0.34		$	0.51		$	0.66		$	1.06
Undistributed earnings (loss)	(2.66		)	0.36			(3.08		)	0.48
Basic earnings (loss) per common share	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54
Diluted weighted average shares outstanding:
Common shares	173,252			116,126			173,693			110,039
Net effect of dilutive stock options (1)	—			—			—			—
	173,252			116,126			173,693			110,039
Diluted earnings (loss) per common share:
Distributed earnings	$	0.34		$	0.51		$	0.66		$	1.06
Undistributed earnings (loss)	(2.66		)	0.36			(3.08		)	0.48
Diluted earnings (loss) per common share	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54

__________________

(1)For the three and six months endedJune 30, 2013 and 2012, the Company had an aggregate of 131 stock options outstanding with a weighted average exercise price of $30.00 that were not included in the calculation of EPS, as their inclusion would have been anti-dilutive. These instruments may have a dilutive impact on future EPS.

4. INVESTMENTS IN SECURITIES AND INTEREST RATE SWAP AND CAP CONTRACTS AND OTHER ASSETS

The Company’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. ASC 820, Fair Value Measurements, classifies these inputs into the following hierarchy:

Level 1 Inputs—Quoted prices for identical instruments in active markets.

Level 2 Inputs—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs—Instruments with primarily unobservable value drivers.

15

Excluded from the tables below are financial instruments carried on the accompanying financial statements at cost basis, which is deemed to approximate fair value, primarily due to the short duration of these instruments, including cash and cash equivalents, receivables, payables and borrowings under repurchase arrangements with initial terms of 120 days or less. The fair value of these instruments is determined using level two inputs. The following tables provide a summary of the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

June 30, 2013	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Agency RMBS	$	—	$	17,211,259	$	—	$	17,211,259
Other Investments	—		—		6,945		6,945
Derivative assets	—		365,067		—		365,067
Total	$	—	$	17,576,326	$	6,945	$	17,583,271
Liabilities
Derivative liabilities	$	—	$	54,242	$	—	$	54,242

December 31, 2012	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Agency RMBS	$	—	$	20,804,143	$	—	$	20,804,143
U.S. Treasury Bills	37,999		—		—		37,999
Other Investments	—		—		19,576		19,576
Derivative assets	—		124,169		—		124,169
Total	$	37,999	$	20,928,312	$	19,576	$	20,985,887
Liabilities
Derivative liabilities	$	—	$	98,575	$	—	$	98,575

Other investments is comprised of CLOs and real estate assets. The table below presents a reconciliation of changes in other investments classified as Level 3 in the Company’s financial statements for the three and six months endedJune 30, 2013 and 2012. CLOs were generally valued using valuations provided by broker quotations. The Company validated the broker quotations using internal discounted cash flow models. The significant unobservable inputs used in the fair value measurement of the Company’s CLOs were prepayment rates, probability of default, and recovery rate in the event of default. Significant changes in any of those inputs in isolation would have resulted in a materially different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity upon default and a directionally opposite change in the assumption used for prepayment rates. The Company did not own any CLOs as of June 30, 2013. The weighted average inputs to the models as of December 31, 2012 were:

	Constant  Prepayment Rate		Default Rate		Recovery Rate		Recovery Lag
December 31, 2012	20	%	2	%	69	%	6 Months

Fair values of real estate assets are valued based on discounted cash flow models. A discussion of the method of fair valuing these assets is included above in Note 2 “Investment Valuation.” The significant unobservable input used in the fair value measurement is capitalization rates, which the Company estimated to be between 4% and 5% at June 30, 2013 and December 31, 2012.  

16

Level 3 Fair Value Reconciliation

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Other investments	2013			2012			2013			2012
Beginning balance level 3 assets	$	8,495		$	21,415		$	19,576		$	18,675
Cash payments recorded as a reduction of cost basis	(88		)	(1,063		)	(324		)	(2,118		)
Change in net unrealized appreciation (depreciation)	(1,203		)	(2,478		)	(6,721		)	1,317
Net purchases (sales)	(1,550		)	6,928			(12,005		)	6,928
Net gain (loss) on sales	1,291			—			6,419			—
Transfers into (out of) level 3	—			—			—			—
Ending balance level 3 assets	$	6,945		$	24,802		$	6,945		$	24,802

The Agency RMBS portfolio consisted of Agency RMBS as follows:

June 30, 2013	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
15 Year Fixed Rate	$	5,582,309	$	5,773,741	$	104.51	$	103.43	N/A	3.17	%	15.2	%
20 Year Fixed Rate	1,028,057		1,044,339		104.91		101.58		N/A	3.15	%	7.6	%
30 Year Fixed Rate	7,683,260		7,837,908		104.30		102.01		N/A	3.59	%	7.8	%
Hybrid ARMs	2,511,218		2,555,271		103.74		101.75		74.8	2.59	%	17.4	%
Total/Weighted Average	$	16,804,844	$	17,211,259	$	104.32	$	102.42		3.27	%	13.5	%

December 31, 2012	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
10 Year Fixed Rate	$	207,091	$	219,747	$	103.60	$	106.11	N/A	3.50	%	19.4	%
15 Year Fixed Rate	11,092,374		11,717,136		104.32		105.63		N/A	3.05	%	16.1	%
20 Year Fixed Rate	1,087,835		1,148,932		104.96		105.62		N/A	3.17	%	10.1	%
30 Year Fixed Rate	3,571,692		3,817,488		105.78		106.88		N/A	3.59	%	8.9	%
Hybrid ARMs	3,722,510		3,900,840		103.54		104.79		74.3	2.71	%	19.1	%
Total/Weighted Average	$	19,681,502	$	20,804,143	$	104.47	$	105.70		3.10	%	15.8	%

__________________

⁽¹⁾  MTR, or “Months to Reset” is the weighted average number of months remaining before the fixed rate on a hybrid ARM becomes a variable rate. At the end of the fixed period, the variable rate will be determined by the margin and the pre-specified caps of the ARM. After the fixed period, 100% of the hybrid ARMS in the portfolio reset annually.

⁽²⁾  CPR, or “Constant Prepayment Rate,” is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the constant prepayment rate is an annualized version of the prior three month prepayment rate. Securities with no prepayment history are excluded from this calculation.

As of June 30, 2013 and December 31, 2012, the Company’s Agency RMBS were purchased at a net premium to their par value with approximately $726.9 million and $879.6 million, respectively, of unamortized premium included in their cost basis. The premium purchase price is due to the average coupon interest rates on these investments being higher than prevailing market rates.

Actual maturities of Agency RMBS are generally shorter than stated contractual maturities (which range up to 30 years), as they are affected by the contractual lives of the underlying mortgages, periodic payments and prepayments of principal. As of June 30, 2013 and December 31, 2012, the average final contractual maturity of the Company’s Agency RMBS portfolio is in year 2037 and 2033, respectively.

In order to mitigate its interest rate exposure, the Company enters into interest rate swap and cap contracts. The Company had the following activity in interest rate swap and cap transactions during the three and six months endedJune 30, 2013 and 2012 (in thousands):

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Three and Six Months Ended June 30, 2013					Three and Six Months Ended June 30, 2012
Trade Date	Transaction	Notional			Trade Date	Transaction	Notional
February 2013	Opened	$	1,500,000		April 2012	Opened	$	500,000
March 2013	Terminated	(500,000		)	May 2012	Opened	600,000
March 2013	Opened	1,200,000			June 2012	Opened	600,000
April 2013	Opened	500,000			Net Increase		$	1,700,000
May 2013	Opened	500,000
May 2013	Matured	(100,000		)
June 2013	Terminated	(700,000		)
June 2013	Matured	(300,000		)
Net Increase		$	2,100,000

As of June 30, 2013 and December 31, 2012, the Company had pledged Agency RMBS and U.S Treasury securities with a fair value of $86.5 million and $127.6 million, respectively, as collateral on interest rate swap and cap contracts. The Company had Agency RMBS and U.S. Treasuries of $209.1 million and cash of $106.7 million pledged to it as collateral for its interest rate swap and cap contracts as of June 30, 2013. In addition, the Company had Agency RMBS and U.S. Treasuries of $18.4 million and cash of $28.9 million pledged to it as collateral for its interest rate cap contracts as of December 31, 2012. Below is a summary of our interest rate swap and cap contracts open as of June 30, 2013 and December 31, 2012 and the net gain and loss on swap and cap contracts for the three and six months ended June 30, 2013 and 2012 (in thousands):

Derivatives not designated as hedging instruments under ASC 815(a)
Interest Rate Swap Contracts	Notional Amount		Fair Value			Statement of Assets and Liabilities Location
June 30, 2013	$	4,840,000	$	(54,242	)	Derivative liabilities, at fair value
June 30, 2013	3,750,000		76,612			Derivative assets, at fair value
December 31, 2012	6,490,000		(98,575		)	Derivative liabilities, at fair value
December 31, 2012	1,000,000		1,180			Derivative assets, at fair value
Interest Rate Cap Contracts	Notional Amount		Fair Value			Statement of Assets and Liabilities Location
June 30, 2013	$	4,400,000	$	288,455		Derivative assets, at fair value
December 31, 2012	3,400,000		122,989			Derivative assets, at fair value

		Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments Under ASC 815(a)	Location of Gain or (Loss) Recognized in Income on Derivative	Three Months Ended June 30,					Six Months Ended June 30,
		2013		2012			2013		2012
Interest rate swap and cap contracts	Net gain (loss) from swap and cap contracts	$	196,176	$	(24,356	)	$	206,267	$	(41,785	)

__________________

(a) See Note 2 for additional information on the Company’s purpose for entering into interest rate swaps and caps and the decision not to designate them as hedging instruments.

Credit Risk

At June 30, 2013 and December 31, 2012, the Company continued to have minimal exposure to credit losses on its mortgage assets by owning principally Agency RMBS. The payment of principal and interest on Agency RMBS is guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae. In September 2008, both Freddie Mac and Fannie Mae were placed in the conservatorship of the United States government.

On August 5, 2011, Standard & Poor’s downgraded the U.S.’s credit rating to AA+ for the first time. Because Fannie Mae and Freddie Mac are in conservatorship of the U.S. Government, the implied credit ratings of Agency RMBS guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae were also downgraded to AA+. While this downgrade did not have a significant impact on the fair value of the Agency RMBS in the Company’s portfolio, it has increased the uncertainty regarding the credit risk of Agency RMBS.

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5. BORROWINGS

The Company leverages its Agency RMBS portfolio through the use of repurchase agreements. Each of the borrowing vehicles used by the Company bears interest at floating rates based on a spread above or below the LIBOR. The fair value of borrowings under repurchase agreements approximates their carrying amount due to the short term nature of these financial instruments.

Certain information with respect to the Company’s borrowings is summarized in the following tables. Each of the borrowings listed is contractually due in one year or less (dollars in thousands).

June 30, 2013
Outstanding repurchase agreements	$	13,809,319
Interest accrued thereon	$	3,293
Weighted average borrowing rate	0.39		%
Weighted average remaining maturity (in days)	41.9
Fair value of the collateral(1)	$	14,493,844

December 31, 2012
Outstanding repurchase agreements	$	13,981,307
Interest accrued thereon	$	11,717
Weighted average borrowing rate	0.48		%
Weighted average remaining maturity (in days)	19.6
Fair value of the collateral(1)	$	14,693,645

 __________________

(1) Collateral for repurchase agreements consists of Agency RMBS, U.S. Treasuries and Agency Debentures.

At June 30, 2013 and December 31, 2012, the Company did not have any borrowings under repurchase agreements where the amount at risk with an individual counterparty exceeded 10% of net assets.

6. COMMITMENTS AND CONTINGENCIES

The Company enters into certain contracts that contain a variety of indemnifications, principally with broker dealers. As of June 30, 2013 and December 31, 2012, no claims have been asserted under these indemnification agreements. Accordingly, the Company has no liabilities recorded for these agreements as of June 30, 2013 and December 31, 2012.

7. SHARE CAPITAL

The Company has authorized 500,000,000 shares of common stock having par value of $0.01 per share. As of June 30, 2013 and December 31, 2012, the Company had issued and outstanding 172,780,656 and 174,924,149 shares of common stock, respectively. The Company’s common stock transactions during the six months ended June 30, 2013 and 2012 are as follows (in thousands):

	Six Months Ended June 30, 2013					Six Months Ended June 30, 2012
	Shares		Amount			Shares	Amount
Shares sold in public offerings or issued as restricted stock	339		$	1,489		37,745	$	497,813
Shares issued in reinvestment of distributions	—		—			97	1,294
Shares repurchased or canceled	(2,482	)	(26,493		)	—	—
Net increase (decrease)	(2,143	)	$	(25,004	)	37,842	$	499,107

The Company has authorized 50,000,000 shares of preferred stock having a par value of $0.01 per share. As of June 30, 2013 and December 31, 2012, 3,000,000 shares of 7.75% Series A Preferred Stock ($25.00 liquidation preference) were issued and outstanding. As of June 30, 2013, 8,000,000 shares of 7.50% Series B Preferred Stock ($25.00 liquidation preference) were issued and outstanding. The Series A Preferred Stock and Series B Preferred Stock will not be redeemable before August 3, 2017 and April 30, 2018, respectively, except under circumstances where it is necessary to preserve the Company's qualification as a REIT, for federal income tax purposes and the occurrence of a change of control. On or after August 3, 2017 and April 30, 2018, the Company may, at its option, redeem any or all of the shares of the Series A Preferred Stock and Series B

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Preferred Stock, respectively, at $25.00 per share plus any accumulated and unpaid dividends to, but not including, the respective redemption date. The Series A Preferred Stock and Series B Preferred Stock have no stated maturity and are not subject to any sinking fund or mandatory redemption.

Equity Offerings

On February 1, 2012, the Company closed a public offering of 28,750,000 shares of its common stock at a public offering price of $13.28 per share for total net proceeds of approximately $377.3 million, after the underwriting discount and commissions and expenses.

On July 16, 2012, the Company closed a public offering of 46,000,000 shares of its common stock at a public offering price of $13.70 per share for total net proceeds of approximately $622.2 million, after the underwriting discount and commissions and expenses.

On August 3, 2012, the Company closed a public offering of 3,000,000 shares of its Series A Preferred Stock, liquidation preference of $25.00 per share, for total net proceeds of approximately $72.4 million, after the underwriting discount and commissions and expenses.

On April 30, 2013, the Company closed a public offering of 8,000,000 shares of its Series B Preferred Stock, liquidation preference of $25.00 per share, for total net proceeds of approximately $193.6 million, after the underwriting discount and commissions and expenses.

Dividend Reinvestment and Direct Stock Purchase Plan (“DSPP”)

The Company sponsors a dividend reinvestment and direct stock purchase plan through which stockholders may purchase additional shares of common stock by reinvesting some or all of the cash dividends received on shares of common stock.

Stockholders may also make optional cash purchases of shares of common stock subject to certain limitations detailed in the plan prospectus. For the six months ended June 30, 2013 the Company did not issue any shares under the plan. For the six months ended June 30, 2012, the Company issued 3,020,306 shares under the plan raising approximately $41.1 million of net proceeds. As of June 30, 2013 and December 31, 2012, there were approximately 4.1 million shares available for issuance under the plan.

Restricted Stock Awards

For the six months ended June 30, 2013 and 2012, the Company granted 338,942 and 196,456 shares of restricted stock, respectively, to certain of its directors, officers and employees.

Equity Placement Program (“EPP”)

On June 7, 2011, the Company entered into a sales agreement with JMP Securities LLC whereby the Company may, from time to time, publicly offer and sell up to 15.0 million shares of the Company’s common stock through at-the-market transactions and/or privately negotiated transactions. For the six months ended June 30, 2013, the Company did not issue any shares under the plan. For the six months ended June 30, 2012, the Company issued 5,874,936 shares under the plan raising approximately $79.6 million. As of June 30, 2013 and December 31, 2012, approximately 3.1 million shares of common stock remained available for issuance and sale under the sales agreement.

Share Repurchase Program

On November 15, 2012, the Company announced that its board of directors had authorized the repurchase of shares of the Company’s common stock having an aggregate value of up to $250 million. For the six months ended June 30, 2013, the Company repurchased 2,469,468 shares with a weighted average purchase price of $10.64 or approximately $26.3 million in the aggregate. The Company did not make any repurchases during 2012.

8. FINANCIAL HIGHLIGHTS

In accordance with financial reporting requirements applicable to investment companies, the Company has included below certain financial highlight information for the three and six months ended June 30, 2013 and 2012:

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	Per Common Share
	Three Months Ended June 30,								Six Months Ended June 30,
	2013				2012				2013				2012
Net asset value, beginning of period	$	12.87			$	13.14			$	13.31			$	13.02
Net income (loss):
Net investment income	0.36			(a)	0.49			(a)	0.66			(a)	1.00			(a)
Net gain (loss) from investments and swap and cap contracts	(2.64		)	(a)	0.38			(a)	(3.03		)	(a)	0.54			(a)
Net income (loss)	(2.28		)		0.87				(2.37		)		1.54
Dividends on preferred stock	(0.02		)	(a)	—				(0.03		)	(a)	—
Net income (loss) available to common shares	(2.30		)		0.87				(2.40		)		1.54
Capital transactions:
Distributions to common stockholders	(0.34		)		(0.50		)		(0.66		)		(1.00		)
Issuance/Repurchase of common and preferred shares and amortization of share based compensation	(0.03		)	(a)	0.01			(a)	(0.05		)	(a)	(0.04		)	(a)
Net decrease in net asset value from capital transactions	(0.37		)		(0.49		)		(0.71		)		(1.04		)
Net asset value, end of period	$	10.20			$	13.52			$	10.20			$	13.52
Net asset value total return (%)	(18.10		)%	(b)	6.70		%	(b)	(18.41		)%	(b)	11.52		%	(b)
Market value total return (%)	(18.65		)%	(b)	8.98		%	(b)	(16.96		)%	(b)	12.55		%	(b)
Ratios to Average Net Assets
Expenses before interest expense	0.98		%	(c)	1.33		%	(c)	0.96		%	(c)	1.39		%	(c)
Total expenses	3.40		%	(c)	3.59		%	(c)	3.44		%	(c)	3.51		%	(c)
Net investment income	10.66		%	(c)	14.45		%	(c)	9.77		%	(c)	14.83		%	(c)

 __________________

(a) Calculated based on average shares outstanding during the period. Average shares outstanding include vested and unvested restricted shares and differs from weighted average shares outstanding used in calculating EPS (see Note 3).

(b) Not computed on an annualized basis.

(c) Computed on an annualized basis.

9. SUBSEQUENT EVENTS

On July 1, 2013, an aggregate of 11,865 shares of restricted common stock were granted to certain directors as a portion of their compensation for serving on the Company’s board of directors.

The CPR of the Company’s Agency RMBS portfolio was approximately 12.0% for the month of July 2013.

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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Quarterly Report on Form 10-Q, we refer to CYS Investments, Inc. as “we,” “us,” “our company,” or “our,” unless we specifically state otherwise or the context indicates otherwise. The following defines certain of the commonly used terms in this quarterly report on Form 10-Q: RMBS refers to residential mortgage-backed securities; agency securities or Agency RMBS refers to our RMBS that are issued or whose principal and interest payments are guaranteed by a federally chartered corporation, such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”); ARMs refers to adjustable-rate mortgage loans that typically have interest rates that adjust annually to an increment over a specified interest rate index; and hybrids refers to ARMs that have interest rates that are fixed for a specified period of time and, thereafter, generally adjust annually to an increment over a specified interest rate index.

The following discussion should be read in conjunction with our financial statements and accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed on February 15, 2013.

Forward Looking Statements

When used in this Quarterly Report on Form 10-Q, in future filings with the Securities and Exchange Commission (“SEC”) or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, are intended to identify “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, and, as such, may involve known and unknown risks, uncertainties and assumptions. The forward-looking statements we make in this Quarterly Report on Form 10-Q include, but are not limited to, statements about the following:

• the effect of movements in interest rates on our assets and liabilities (including our hedging instruments) and our net income;

• our investment, financing and hedging strategy and the success of these strategies;

• the effect of increased prepayment rates on our portfolio;

• our ability to convert our assets into cash or extend the financing terms related to our assets;

• the effect of widening credit spreads and/or shifts in the yield curve on the value of our assets and investment strategy;

• the types of indebtedness we may incur;

• our ability to quantify risks based on historical experience;

• our ability to be taxed as a real estate investment trust (“REIT”) and to maintain an exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”);

• our assessment of counterparty risk;

• the risk of counterparty defaults;

• our ability to meet short term liquidity requirements with our cash flow from operations and borrowings;

• the effect of rising interest rates on economic indicators such as employment and home prices;

• our liquidity;

• our asset valuation policies;

• our distribution policy;

• changes in the presentation of the Company's financial statements; and

• the effect of recent U.S. Government actions on interest rates and the housing and credit markets.

Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. The following factors could cause actual results to vary from our forward-looking statements:

• the factors referenced in this Quarterly Report on Form 10-Q;

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• changes in our investment, financing and hedging strategy;

• the adequacy of our cash flow from operations and borrowings to meet our short term liquidity requirements;

• the liquidity of our portfolio;

• unanticipated changes in our industry, interest rates, the credit markets, the general economy or the real estate market;

• changes in interest rates and the market value of our Agency RMBS;

• changes in the prepayment rates on the mortgage loans underlying our Agency RMBS;

• our ability to borrow to finance our assets;

• changes in government regulations affecting our business;

• our ability to maintain our qualification as a REIT for federal income tax purposes;

• our ability to maintain our exemption from registration under the Investment Company Act and the availability of such exemption in the future; and

• risks associated with investing in real estate assets, including changes in business conditions and the general economy.

These and other risks, uncertainties and factors, including those described elsewhere in this report, could cause our actual results to differ materially from those projected in any forward-looking statements we make. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a specialty finance company created with the objective of achieving consistent risk-adjusted investment income. We seek to achieve this objective by investing, on a leveraged basis, in Agency RMBS. In addition, our investment guidelines permit investments in collateralized mortgage obligations issued by a government agency or government sponsored entity that are collateralized by Agency RMBS (“CMOs”), U.S. Treasury Securities and U.S. Agency Debentures, although we had not invested in any CMOs as of June 30, 2013. We commenced operations in February 2006, and completed our initial public offering in June 2009. Our common stock, our 7.75% Series A Cumulative Redeemable Preferred Stock, $25.00 liquidation preference (the "Series A Preferred Stock"), and our 7.50% Series B Cumulative Redeemable Preferred Stock, $25.00 liquidation preference (the "Series B Preferred Stock"), trade on the New York Stock Exchange under the symbols “CYS,” "CYS PrA" and "CYS PrB," respectively.

We earn investment income from our investment portfolio, and we use leverage to seek to enhance our returns. Our net investment income is generated primarily from the difference, or net spread, between the interest income we earn on our investment portfolio and the cost of our borrowings and hedging activities. The amount of net investment income we earn on our investments depends in part on our ability to control our financing costs, which comprise a significant portion of our operating expenses. Although we leverage our portfolio investments in Agency RMBS to seek to enhance our potential returns, leverage also may exacerbate losses.

While we use hedging to mitigate some of our interest rate risk, we do not hedge all of our exposure to changes in interest rates. This is because there are practical limitations on our ability to insulate our portfolio from all potential negative consequences associated with changes in short term interest rates in a manner that will allow us to achieve attractive spreads on our portfolio.

In addition to investing in issued pools of Agency RMBS, we regularly utilize forward settling transactions, including forward-settling purchases of Agency RMBS where the pool is “to-be-announced” (“TBAs”). Pursuant to these TBAs, we agree to purchase, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. For our other forward settling transactions, we agree to purchase, for future delivery, Agency RMBS. However, unlike our TBAs, these forward settling transactions reference an identified Agency RMBS.

We have elected to be taxed as a REIT and have complied, and intend to continue to comply, with the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), with respect thereto. Accordingly, we generally do not expect to be subject to federal income tax on our REIT taxable income that we currently distribute to our stockholders if certain asset, income and ownership tests and recordkeeping requirements are fulfilled. Even if we maintain our qualification as a REIT, we may be subject to some federal, state and local taxes on our income.

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Factors that Affect our Results of Operations and Financial Condition

A variety of industry and economic factors may impact our results of operations and financial condition. These factors include:

• interest rate trends;

• prepayment rates on mortgages underlying our Agency RMBS, and credit trends insofar as they affect prepayment rates;

• competition for investments in Agency RMBS;

• actions taken by the U.S. Government, including the U.S. Federal Reserve (the "Federal Reserve") and the U.S. Treasury;

• credit rating downgrades of the United States’ and certain European countries’ sovereign debt; and

• other market developments.

In addition, a variety of factors relating to our business may also impact our results of operations and financial condition. These factors include:

• our degree of leverage;

• our access to funding and borrowing capacity;

• our borrowing costs;

• our hedging activities;

• the market value of our investments; and

• the REIT requirements and the requirements to qualify for a registration exemption under the Investment Company Act.

Changes in interest rates, particularly short term interest rates, may significantly influence our net investment income.

Our net investment income may be affected by a difference between actual prepayment rates and our projections. Prepayments on loans and securities may be influenced by changes in market interest rates and homeowners’ ability and desire to refinance their mortgages. To the extent we have acquired assets at a premium or discount to par value, changes in prepayment rates may impact our anticipated yield.

Trends and Recent Market Impacts

U.S. Macroeconomic

On September 13, 2012, the U.S. Federal Reserve Open Market Committee (the “FOMC” or “Committee”) announced an open-ended program to purchase an additional $40 billion of Agency RMBS per month until the unemployment rate, among other economic indicators, showed signs of improvement. The FOMC anticipated that it would maintain a highly accommodative stance, and keep the target range for the Federal Funds Rate between zero and 0.25% through at least mid-2015. The Federal Reserve provided further guidance to the market in December 2012 that it intended to keep the Federal Funds Rate close to zero while the unemployment rate is above 6.5% and as long as inflation does not rise above 2.5%. In December 2012, the Federal Reserve also announced that it would initially begin purchasing $45 billion of long-term Treasury bonds each month and noted that such amount may increase in the future.

In the April 30-May 1, 2013 FOMC meeting, all but a few of the Committee members agreed to continue purchases of MBS at a pace of $40 billion per month and purchases of longer-term Treasury securities at a pace of $45 billion per month, and retained its forward guidance about the federal funds rate, including thresholds on the unemployment and inflation rates.

On May 22, 2013, the date on which the May FOMC meeting minutes were released, Chairman Bernanke, responding to a question from the U.S. Congress Joint Economic Committee, stated “If we see continued improvement and we have confidence that that's going to be sustained then we could in the next few meetings take a step down in our pace of purchases.” The effect this statement had on the market was for the rate on the 10 Year Treasury to move above 2%, the Primary Mortgage Rate to 3.73 % and for the price of bonds and stocks to decrease significantly.

In the June 18-19, 2013 FOMC meeting, all but a few of the Committee members agreed to continue purchases of MBS at a pace of $40 billion per month and purchases of longer-term Treasury securities at a pace of $45 billion per month, and retained its forward guidance about the federal funds rate, including thresholds on the unemployment and inflation rates..

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On June 19, 2013, at the FOMC Press Conference, Chairman Bernanke, responding to a journalist's question referring to a hypothetically optimistic economy, stated “In that case, we would expect probably to slow or moderate purchases some time later this year, and then through the middle of-through the early part of next year, and ending, in that scenario, somewhere in the middle of the year.” Chairman Bernanke's remarks had a more profound impact on the bond markets with the rate on the 10 Year Treasury rising to 2.35% and the Primary Mortgage Rate to 4.24%.

For the period from May 21, 2013 to June 28, 2013 the 10 Year Treasury Rate rose 56 basis points from 1.93% to 2.49% (with a high of 2.61% on June 25, 2013) while the Primary Mortgage Rate rose 74 basis points from 3.65% to 4.39% (with a high of 4.58% on June 25, 2013) reflecting a dislocation of the yields on Agency RMBS and Treasuries.

The Federal Reserve continues to maintain its position that the timing and scope of tapering is dependent upon improving economic indicators. More recently, in a press conference on July 12, 2013, Chairman Bernanke stated that “highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy.” Despite this statement, the markets appear to have priced in the expectation that tapering will occur in the near term. While the resulting steepened yield curve creates a more favorable reinvesting environment for the Company, the short-term pricing of Agency RMBS has detached from Treasury securities and swaps, causing a decline in the Company's net assets.

U.S. Employment

For the first six months of 2013, the U.S. economy produced an average of 201,000 jobs a month. In that same period, the U.S. unemployment rate fell from 7.8% at December 31, 2012 to 7.6% at June 30, 2013. However, the participation rate also decreased from 63.6% at December 31, 2012 to 63.5% at June 30, 2013. While these employment figures are positive compared to the 2012 figures, we do not believe they are not indicative of a robust recovery. In addition, the effects of rising interest rates on the consumer and/or employment will likely take several quarters to be reflected in the economic data.

U.S. Housing

The U.S. housing market has continued to improve. According to the Federal Housing Finance Authority ("FHFA") U.S. house price index, U.S. home prices rose 3.7% from December 2012 to April 2013, and have been on an upward trend since February 2012, averaging 0.62% per month. In addition to home prices, housing starts have continued to improve. Building permits hit their highest level since 2008 in March 2013 at 1,005,000, and remained strong at 914,000 in May 2013. Similar to U.S. employment, it is likely the rise in interest rates will slow the housing recovery.

Interest Rates

As described above, the market reactions to the Federal Reserve's actions have created a significant steepening in the yield curve. While short rates have been relatively unchanged, the market's reaction to the possibility of the Federal Reserve tapering large scale asset purchases has pushed the long end of the curve up, bringing the rate on the 10 year Treasury up from 1.85% at March 31, 2013 to 2.49% at June 30, 2013. Below is a graph of the yield curve at June 30, 2013, December 31, 2012 and June 30, 2012.

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Reinvestment Environment

The steepening of the yield curve caused by the market's reaction to a possible Federal Reserve asset purchase tapering improved the reinvesting environment as compared to March 31, 2013. The below table shows potential Agency RMBS investments and their respective net interest margins as of July 10, 2013:

	30 Yr. 3.5%		15 Yr. 3%
Asset Yield	3.52	%	2.50	%
Financing Rate	0.39	%	0.39	%
Hedge Cost (1)	1.19	%	0.45	%
Net interest margin	1.94	%	1.66	%
(1) Assumed 5 Year and 4 Year Swap Hedge Ratio, respectively	88	%	62	%

During the three months endedJune 30, 2013 the average yield on the Company's purchases of Agency RMBS was 2.36%.

Prepayments

During the three months ended June 30, 2013 our portfolio had an average constant prepayment rate ("CPR") of 12.27%.  Using the 10 year Treasury as a proxy, interest rates rose significantly during the second quarter of 2013, and the mortgage refinance index fluctuated during the quarter in a range of 5,230 to 2,560.  The increase in rates has greatly reduced  prepayments, and we expect this to continue as mortgage rates have recently reached three year highs. Thirty year mortgage interest rates have risen from about 3.25% to 4.50% during the quarter, which completely changes the prepayment landscape. We monitor every bond in our portfolio and assess the  relative prepayment attributes.  Due to the recent increase in rates, the focus has shifted from prepayment concerns to extension risk in the portfolio.

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Government Activity

On June 25, 2013, Senators Bob Corker (R-TN) and Mark Warner (D-VA), with Senators Mike Johanns (R-NE), Jon Tester (D-MT), Dean Heller (R-NV), Heidi Heitkamp (D-ND), Jerry Moran (R-KS) and Kay Hagan (D-NC), formally introduced the Housing Finance Reform and Taxpayer Protection Act of 2013 (the “Corker-Warner Bill”) into the U.S. Senate. While the current draft of the Corker-Warner Bill will likely undergo significant changes as it is debated, it is expected to serve as a basis of discussion for congressional efforts to reform Fannie Mae and Freddie Mac.

As currently drafted, the Corker-Warner Bill has three key provisions:

i. the establishment of the Federal Mortgage Insurance Corporation (the “FMIC”);

ii. the creation of a Mortgage Insurance Fund (the “Fund”); and

iii. the wind-down of Fannie Mae and Freddie Mac.

The FMIC would be a government guarantor modeled after the Federal Deposit Insurance Corporation (the “FDIC”) in that it would collect insurance premiums and maintain a deposit fund on all outstanding obligations. Every mortgage-backed security issued through the FMIC would have a private investor bearing the first risk of loss and holding at least $0.10 in equity capital for every dollar of risk. This private capital buffer would serve to protect taxpayers from the risk of default on the mortgages underlying securities issued by the FMIC. Thus, the ultimate purpose of the FMIC would be to bring in credit investors to bear the risk of default while providing liquidity, transparency and access to mortgage credit for the housing finance system.

The FHFA would be abolished after the establishment of the FMIC, and all current responsibilities of the FHFA, as well as its resources, would be transferred to the FMIC. In particular, the Corker-Warner Bill specifies that the FMIC would maintain a database of uniform loan-level information on eligible mortgages, develop standard uniform securitization agreements and oversee the common securitization platform currently being developed by the FHFA.

In the event losses due to default on underlying mortgages exceed the first position losses of private credit investors in securities issued by the FMIC, the FMIC would cover such losses out of the Fund. The Corker-Warner Bill specifies that the FMIC would endeavor to attain a reserve balance of 1.25% of the aggregate outstanding principal balance of covered securities within five years of the establishment of the FMIC and 2.50% of such amount within ten years of the establishment of the FMIC. The Fund would be paid with insurance premiums, akin to user fees, paid by private investors with various reporting and transparency requirements.

As currently proposed, the Corker-Warner Bill would revoke the charters of Fannie Mae and Freddie Mac upon the establishment of the FMIC. Fannie Mae and Freddie Mac would wind down as expeditiously as possible while maximizing returns to taxpayers as their assets are sold off.

On July 11, 2013, members of the U.S. House of Representatives introduced the Protecting American Taxpayers and Homeowners Act (“PATH”), a broad financing reform bill that serves as a counterpart to the Corker-Warner Bill. PATH would also revoke the charters of Fannie Mae and Freddie Mac and remove barriers to private investment. However, PATH would maintain the FHFA and give it oversight over a new non-government, not-for-profit National Mortgage Market Utility whose mission would be to develop best practices standards for the private origination, servicing, pooling and securitizing of mortgages and operate a publicly accessible securitization outlet to match loan originators with investors. Additional provisions of PATH include the reduction in size and scope of the Federal Housing Administration (“FHA”), targeting its mission specifically to first-time borrowers and low- and moderate- income borrowers except in periods of significant credit contraction.

There is no way to know if either proposal will become law or, should one of the proposals become law, if or how the enacted law will differ from the current draft of the bill. It is unclear how this proposal would impact housing finance, and what impact, if any, it would have on mortgage REITs.

On October 4, 2012, the FHFA released its white paper entitled "Building a New Infrastructure for the Secondary Mortgage Market" (the “FHFA White Paper”). This release follows up on the FHFA's February 21, 2012 Strategic Plan for Enterprise Conservatorships, which set forth three goals for the next phase of the Fannie Mae and Freddie Mac conservatorships. These three goals are to (i) build a new infrastructure for the secondary mortgage market, (ii) gradually contract Fannie Mae and Freddie Mac's presence in the marketplace while simplifying and shrinking their operations, and (iii) maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.

The FHFA White Paper proposes a new infrastructure for Fannie Mae and Freddie Mac that has two basic goals. The first goal is to replace the current, outdated infrastructures of Fannie Mae and Freddie Mac with a common, more efficient infrastructure that aligns the standards and practices of the two entities, beginning with core functions performed by both

28

entities such as issuance, master servicing, bond administration, collateral management and data integration. The second goal is to establish an operating framework for Fannie Mae and Freddie Mac that is consistent with the progress of housing finance reform and encourages and accommodates the increased participation of private capital in assuming credit risk associated with the secondary mortgage market. The FHFA recognizes that there are a number of impediments to their goals which may or may not be surmountable, such as the absence of any significant secondary mortgage market mechanisms beyond Fannie Mae, Freddie Mac and Ginnie Mae, and that their proposals are in the formative stages. As a result, it is unclear if the proposals will be enacted. If such proposals are enacted, it is unclear how closely what is enacted will resemble the proposals from the FHFA White Paper or what the effects of the enactment will be.

On September 13, 2012, the Federal Reserve announced a third round of quantitative easing ("QE3"), which is an open-ended program designed to expand the Federal Reserve's holdings of long-term securities by purchasing an additional $40 billion of Agency RMBS per month until key economic indicators, such as the unemployment rate, show signs of improvement. The Federal Reserve also announced that it would keep the target range for the Federal Funds Rate between zero and 0.25% through at least mid-2015.    

The Federal Reserve provided further guidance to the market in December 2012 by stating that it intended to keep the Federal Funds Rate close to zero while the unemployment rate is above 6.5% and as long as inflation does not rise above 2.5%. In December 2012, the Federal Reserve also announced that it would initially begin buying $45 billion of long-term Treasury bonds each month and noted that such amount may increase in the future.     

On January 4, 2012, the Federal Reserve released a report titled “The U.S. Housing Market: Current Conditions and Policy Considerations” to Congress, which provided a framework for thinking about certain issues and tradeoffs that policy makers might consider. It is unclear how future legislation may impact the housing finance market and the investing environment for Agency RMBS as the method of reform is undecided and has not yet been defined by the regulators.

Dodd-Frank Act

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") into law. The Dodd-Frank Act is extensive, complicated and comprehensive legislation that impacts practically all aspects of banking and represents a significant overhaul of many aspects of the regulation of the financial services industry. Although many provisions remain subject to further rulemaking, the Dodd-Frank Act implements numerous and far-reaching regulatory changes that affect financial companies, including us and other banks and institutions which are important to our business model. Certain notable rules are, among other things:

• Requiring regulation and oversight of large, systemically important financial institutions ("SIFI") by establishing an interagency council on systemic risk and implementation of heightened prudential standards and regulation by the Board of Governors of the Federal Reserve for SIFI (including nonbank financial companies), as well as the implementation of the FDIC resolution procedures for liquidation of large financial companies to avoid market disruption;

• applying the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies, savings and loan holding companies and systemically important nonbank financial companies;

• limiting the Federal Reserve’s emergency authority to lend to nondepository institutions to facilities with broad-based eligibility, and authorizing the FDIC to establish an emergency financial stabilization fund for solvent depository institutions and their holding companies, subject to the approval of Congress, the Secretary of the U.S. Treasury and the Federal Reserve;

• creating regimes for regulation of over-the-counter derivatives and non-admitted property and casualty insurers and reinsurers;

• implementing regulation of hedge fund and private equity advisers by requiring such advisers to register with the SEC;

• providing for the implementation of corporate governance provisions for all public companies concerning proxy access and executive compensation; and

• reforming regulation of credit rating agencies.

Qualified Mortgages

The Dodd-Frank Act requires that lenders make a good faith effort to ensure consumers have an ability to repay new mortgage loans based on verified and documented information. To accomplish this, the Dodd-Frank Act created the Consumer Financial Protection Bureau ("CFPB"), which was assigned the responsibility of defining Qualified Mortgage (“QM”). The key factor for lenders and originators is that loans which meet the QM standard give lenders “safe harbor” against future claims that

29

the loans violated “ability to repay” requirements. In January 2013, the CFPB published the definition of a QM. An important part of the QM definition is the cap on how much income can go toward debt: along with the other tests, mortgages made to people who have debt-to-income ratios less than or equal to 43 percent will be considered QM. This requirement helps ensure consumers are borrowing only what they can likely afford and it creates one level of protection for lenders. Before the crisis, many consumers took on mortgages they could not afford based on their incomes, and the QM rules are intended to protect consumers going forward. For a temporary, transitional period, loans that do not have a 43 percent debt-to-income ratio but meet government affordability or other standards, such as eligibility for purchase by Fannie Mae or Freddie Mac, will be considered QMs. Agency RMBS will continue to be a large portion of the overall mortgage market, and we believe that, as a result of this rule-making, it is unlikely that lenders will be willing to make loans without the safe harbor protections of QM. Lenders will be more deliberate and the resulting mortgages will be more consistent and will result in more predictable prepayments. We do not expect this to impact the current supply of Agency RMBS.

Many of the provisions of the Dodd-Frank Act, including certain provisions described above are subject to further study, rulemaking and the discretion of regulatory bodies. As the hundreds of regulations called for by the Dodd-Frank Act are promulgated, we will continue to evaluate their impact. It is unclear how this legislation may impact the borrowing environment, investing environment for Agency RMBS and interest rate swaps as much of the bill’s implementation has not yet been defined by the regulators.

For a discussion of additional risks relating to our business see “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed on February 15, 2013.

Financial Condition

As of June 30, 2013 and December 31, 2012, the Agency RMBS in our portfolio were purchased at a net premium to their par value due to the average interest rates on these investments being higher than the prevailing market rates at the time of purchase. As of June 30, 2013 and December 31, 2012, we had approximately $726.9 million and $879.6 million, respectively, of unamortized premium included in the cost basis of our investments.

As of June 30, 2013 and December 31, 2012, our Agency RMBS portfolio consisted of the following assets:

June 30, 2013	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
15 Year Fixed Rate	$	5,582,309	$	5,773,741	$	104.51	$	103.43	N/A	3.17	%	15.2	%
20 Year Fixed Rate	1,028,057		1,044,339		104.91		101.58		N/A	3.15	%	7.6	%
30 Year Fixed Rate	7,683,260		7,837,908		104.30		102.01		N/A	3.59	%	7.8	%
Hybrid ARMs	2,511,218		2,555,271		103.74		101.75		74.8	2.59	%	17.4	%
Total/Weighted Average	$	16,804,844	$	17,211,259	$	104.32	$	102.42		3.27	%	13.5	%
December 31, 2012
10 Year Fixed Rate	$	207,091	$	219,747	$	103.60	$	106.11	N/A	3.50	%	19.4	%
15 Year Fixed Rate	11,092,374		11,717,136		104.32		105.63		N/A	3.05	%	16.1	%
20 Year Fixed Rate	1,087,835		1,148,932		104.96		105.62		N/A	3.17	%	10.1	%
30 Year Fixed Rate	3,571,692		3,817,488		105.78		106.88		N/A	3.59	%	8.9	%
Hybrid ARMs	3,722,510		3,900,840		103.54		104.79		74.3	2.71	%	19.1	%
Total/Weighted Average	$	19,681,502	$	20,804,143	$	104.47	$	105.70		3.10	%	15.8	%

 __________________

(1) MTR, or “Months to Reset” is the weighted average number of months remaining before the fixed rate on a hybrid ARM becomes a variable rate. At the end of the fixed period, the variable rate will be determined by the margin and the pre-specified caps of the ARM. After the fixed period, 100% of the hybrid ARMS in the portfolio reset annually.

(2) CPR, or “Constant Prepayment Rate” is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the constant prepayment rate is an annualized version of the prior three month prepayment rate. Securities with no prepayment history are excluded from this calculation.

The CPR of the Company’s Agency RMBS portfolio was approximately 12.0% for the month of July 2013.

As shown in the tables above, the Company repositioned its portfolio from December 2012 to June 2013 so that more of the portfolio consisted of 30 year fixed rate Agency RMBS and less 15 year fixed rate Agency RMBS. Actual maturities of Agency RMBS are generally shorter than stated contractual maturities (which range up to 30 years), as they are affected by the contractual lives of the underlying mortgages, periodic payments and prepayments of principal. As of June 30, 2013 and

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December 31, 2012, the average final contractual maturity of the mortgage portfolio is in year 2037 and 2033, respectively. The average expected life of our Agency RMBS reflects the estimated average period of time the securities in the portfolio will remain outstanding. The average expected lives of our Agency RMBS do not exceed five years, based upon the prepayment model obtained through subscription-based financial information service providers. The prepayment model considers current yield, forward yield, the steepness of the yield curve, current mortgage rates, the mortgage rate of the outstanding loan, loan age, margin and volatility. The actual lives of the Agency RMBS in our investment portfolio could be longer or shorter than those estimates depending on the actual prepayment rates experienced over the lives of the applicable securities.

Hedging Instruments

We seek to hedge as much of the interest rate risk we determine is in the best interests of our stockholders. Our policies do not contain specific requirements as to the percentages or amount of interest rate risk we are required to hedge. No assurance can be given that our hedging activities will have the desired beneficial impact on our results of operations or financial condition.

Interest rate hedging may fail to protect or could adversely affect us because, among other things:

• interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;

• available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;

• due to prepayments on assets and repayments of debt securing such assets, the duration of the hedge may not match the duration of the related liability or asset;

• the credit quality of the hedging counterparty may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and

• the hedging counterparty may default on its obligation to pay.

We engage in interest rate swaps and caps as a means of mitigating our interest rate risk on forecasted interest expense associated with repurchase agreements for the term of the swap contract. An interest rate swap is a contractual agreement entered into by two counterparties under which each agrees to make periodic payments to the other for an agreed period of time based upon a notional amount of principal. Under the most common form of interest rate swap, commonly known as a fixed-floating interest rate swap, a series of fixed interest rate payments on a notional amount of principal is exchanged for a series of floating interest rate payments on such notional amount. In a simple interest rate cap, one investor pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). When the floating interest rate (the “floating rate”) exceeds the cap rate, the investor receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. Alternatively, an investor may receive a premium and pay the difference in cap rate and floating rate. Below is a summary of our interest rate swaps and caps as of June 30, 2013 and December 31, 2012:

				Weighted Average
June 30, 2013	Number of Contracts	Notional (000's)		Rate		Maturity	Fair Value (000's)
Interest Rate Swaps	22	$	8,590,000	1.215	%	March 2016	$	22,370
Interest Rate Caps	11	4,400,000		1.443	%	September 2019	288,455
December 31, 2012
Interest Rate Swaps	21	$	7,490,000	1.270	%	August 2015	$	(97,395	)
Interest Rate Caps	10	3,400,000		1.622	%	July 2019	122,989

The current fair value of interest rate swaps and caps is heavily dependent on the prevailing market fixed rate, the corresponding term structure of floating rates (known as the yield curve) as well as the expectation of changes in future floating rates.

Liabilities

We have entered into repurchase agreements to finance some of our purchases of Agency RMBS. Borrowings under these agreements are secured by our Agency RMBS and bear interest at rates that have historically moved in close relationship to LIBOR. At June 30, 2013, we had approximately $13,809.3 million of liabilities pursuant to repurchase agreements with 27 counterparties that had weighted average interest rates of approximately 0.39%, and a weighted average maturity of 41.9 days. In addition, as of June 30, 2013, we had approximately $6,126.2 million in payable for securities purchased, a portion of which will be financed through repurchase agreements. At December 31, 2012, we had approximately $13,981.3 million of liabilities pursuant to repurchase agreements with 23 counterparties that had weighted average interest rates of approximately 0.48%, and

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a weighted average maturity of 19.6 days. In addition, as of December 31, 2012 we had approximately $4,515.5 million in payable for securities purchased, a portion of which was financed through repurchase agreements. Below is a summary of our payable for securities purchased as of June 30, 2013 and December 31, 2012 (in thousands).

June 30, 2013
Forward Settling Purchases	Settle Date	Par Value		Payable
FHLMC - 30 Year 3.50% Fixed	7/15/2013	$	300,000	$	314,174
FNMA - 30 Year 3.50% Fixed	7/15/2013	4,052,947		4,251,785
FNMA - 30 Year 4.00% Fixed	7/15/2013	151,713		157,449
FNMA - 15 Year 2.50% Fixed	7/18/2013	500,000		520,232
FNMA - 15 Year 3.00% Fixed	7/18/2013	29,992		30,888
FNMA - 30 Year 4.00% Fixed	8/12/2013	825,000		851,694
		$	5,859,652	$	6,126,222

December 31, 2012
Forward Settling Purchases	Settle Date	Par Value		Payable
FNMA - 20 Year 3.0% Fixed	1/14/2013	$	300,000	$	316,122
FNMA - 30 Year 3.5% Fixed	1/14/2013	1,550,000		1,646,880
FNMA - 15 Year 2.5% Fixed	1/17/2013	950,000		993,307
FNMA - 15 Year 3.5% Fixed	1/17/2013	38,000		40,363
FNMA - 15 Year 4.5% Fixed	1/17/2013	16,000		17,232
FNMA - 30 Year 2.43% Hybrid ARM	1/24/2013	25,000		26,234
FNMA - 30 Year 2.60% Hybrid ARM	1/25/2013	50,000		52,259
FNMA - 30 Year 2.15% Hybrid ARM	1/29/2013	100,000		103,542
FNMA - 30 Year 2.57% Hybrid ARM	1/29/2013	82,000		85,618
FNMA - 30 Year 3.5% Fixed	2/12/2013	200,000		212,651
FNMA - 15 Year 2.5% Fixed	2/14/2013	950,000		990,186
FNMA - 30 Year 2.17% Hybrid ARM	2/25/2013	30,000		31,107
		$	4,291,000	$	4,515,501

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Summary Financial Data

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share numbers)	2013			2012			2013			2012
INVESTMENT INCOME:
Interest income from Agency RMBS	$	80,991		$	70,352		$	153,092		$	134,499
Other income	560			1,395			1,560			2,617
Total investment income	81,551			71,747			154,652			137,116
EXPENSES:
Interest	14,047			8,993			29,078			15,846
Operating expenses	5,671			5,279			11,224			10,398
Total expenses	19,718			14,272			40,302			26,244
Net investment income	61,833			57,475			114,350			110,872
Net gain (loss) from investments	(656,295		)	68,586			(735,106		)	101,736
GAINS AND (LOSSES) FROM SWAP AND CAP CONTRACTS:
Net swap and cap interest income (expense)	(26,699		)	(12,687		)	(48,655		)	(24,193		)
Net gain (loss) on termination of swap and cap contracts	7,329			—			15,959			—
Net unrealized appreciation (depreciation) on swap and cap contracts	215,546			(11,669		)	238,963			(17,592		)
Net gain (loss) from swap and cap contracts	196,176			(24,356		)	206,267			(41,785		)
NET INCOME (LOSS)	$	(398,286	)	$	101,705		$	(414,489	)	$	170,823
DIVIDEND ON PREFERRED STOCK	(3,995		)	—			(5,448		)	—
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES	$	(402,281	)	$	101,705		$	(419,937	)	$	170,823
Net income (loss) per common share (diluted)	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54
Distributions per common share	$	0.34		$	0.50		$	0.66		$	1.00
Key Balance Sheet Metrics
Average settled Agency RMBS (1)	$	15,974,500		$	10,737,980		$	16,067,071		$	10,052,857
Average total Agency RMBS (2)	$	19,944,791		$	13,485,034		$	20,091,762		$	12,624,329
Average repurchase agreements (3)	$	13,871,404		$	9,497,267		$	14,022,300		$	8,932,952
Average Agency RMBS liabilities (4)	$	17,841,695		$	12,244,321		$	18,046,991		$	11,504,424
Average net assets (5)	$	2,321,128		$	1,591,432		$	2,341,681		$	1,494,876
Average common shares outstanding (6)	174,145			116,881			174,505			110,751
Leverage ratio (at period end) (7)	7.5:1			7.6:1			7.5:1			7.6:1
Key Performance Metrics*
Average yield on settled Agency RMBS (8)	2.03		%	2.62		%	1.91		%	2.68		%
Average yield on total Agency RMBS including drop income (9)	2.27		%	2.56		%	2.12		%	2.62		%
Average cost of funds and hedge (10)	1.17		%	0.91		%	1.11		%	0.90		%
Adjusted average cost of funds and hedge (11)	0.91		%	0.71		%	0.86		%	0.70		%
Interest rate spread net of hedge (12)	0.86		%	1.71		%	0.80		%	1.78		%
Interest rate spread net of hedge including drop income (13)	1.36		%	1.85		%	1.26		%	1.92		%
Operating expense ratio (14)	0.98		%	1.33		%	0.96		%	1.39		%

___________

(1) The average settled Agency RMBS is calculated by averaging the month end cost basis of settled Agency RMBS during the period.

(2) The average total Agency RMBS is calculated by averaging the month end cost basis of total Agency RMBS during the period.    

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(3) The average repurchase agreements are calculated by averaging the month end repurchase agreements balance during the period.    

(4) The average Agency RMBS liabilities are calculated by averaging the month end repurchase agreements balance plus average unsettled Agency RMBS during the period.            

(5) The average net assets are calculated by averaging the month end net assets 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 balance plus payable for securities purchased minus receivable for securities sold by (ii) net assets.        

(8) The average yield on settled Agency RMBS for the period is calculated by dividing interest income from Agency RMBS by average settled Agency RMBS.    

(9) The average yield on total Agency RMBS including drop income for the period is calculated by dividing interest income from Agency RMBS plus drop income by average total Agency RMBS.    

(10) The average cost of funds and hedge for the period is calculated by dividing total interest expense, including net swap and cap interest income (expense), by average repurchase agreements.

(11) The adjusted average cost of funds and hedge for the period is calculated by dividing total interest expense, including net swap and cap interest income (expense), by average Agency RMBS liabilities.            

(12) 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 Agency RMBS.

(13) 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 total yield on Agency RMBS including drop income.            

(14) The operating expense ratio for the period is calculated by dividing operating expenses by average net assets.            

* All percentages are annualized.    

.

Core Earnings

Core Earnings represents a non-GAAP financial measure and is defined as net income (loss) available to common shares excluding net gain (loss) from investments, net gain (loss) on termination of swap and cap contracts and net unrealized appreciation (depreciation) on swap and cap contracts. In order to evaluate the effective yield of the portfolio, management uses Core Earnings to reflect the net investment income of our portfolio as adjusted to include the net swap and cap interest income (expense). Core Earnings allows management to isolate the interest income (expense) associated with our swaps and caps in order to monitor and project our borrowing costs and interest rate spread. In addition, management utilizes Core Earnings as a key metric in conjunction with other portfolio and market factors to determine the appropriate leverage and hedging ratios, as well as the overall structure of the portfolio.

We adopted Accounting Standards Codification (“ASC”) 946, Clarification of the Scope of Audit and Accounting Guide Investment Companies (“ASC 946”), prior to its deferral in February 2008, while most, if not all, other public companies that invest only in Agency RMBS have not adopted ASC 946. Under ASC 946, we use financial reporting specified for investment companies, and accordingly, its investments are carried at fair value with changes in fair value included in earnings. Most other public companies that invest only in Agency RMBS include most changes in the fair value of their investments within other comprehensive income not in earnings. As a result, investors are not able to readily compare our results of operations to those of most of our competitors. We believe that the presentation of Core Earnings is useful to investors because it provides a means to compare our Core Earnings to those of our peers. In addition, because Core Earnings isolates the net swap and cap interest income (expense) it provides investors with an additional metric to identify trends in the our portfolio as they relate to the interest rate environment.

The primary limitation associated with Core Earnings as a measure of our financial performance over any period is that it excludes the effects of net realized gain (loss) from investments. In addition, our presentation of Core Earnings may not be comparable to similarly-titled measures of other companies, which may use different calculations. As a result, Core Earnings should not be considered as a substitute for our GAAP net income (loss) as a measure of our financial performance or any measure of our liquidity under GAAP.

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Non-GAAP Reconciliation:	2013			2012			2013			2012
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES	$	(402,281	)	$	101,705		$	(419,937	)	$	170,823
Net (gain) loss from investments	656,295			(68,586		)	735,106			(101,736		)
Net (gain) loss on termination of swap and cap contracts	(7,329		)	—			(15,959		)	—
Net unrealized (appreciation) depreciation on swap and cap contracts	(215,546		)	11,669			(238,963		)	17,592
Core Earnings	$	31,139		$	44,788		$	60,247		$	86,679

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Results of Operations

Agency RMBS Market during Second Quarter 2013

In the second quarter of 2013, Agency RMBS markets, and therefore the Company's results, were significantly impacted by, a series of communications made by the Federal Reserve regarding the timing of QE3 tapering. As the perceived likelihood of QE3 tapering increased, Agency RMBS markets reacted, resulting in markedly lower prices. The following table illustrates an example of the recent volatility of Agency RMBS prices and yields:

		Fannie Mae 30 Year 3.5%
Date	Press Release	Price Day Prior to Release	Price Day of Release	Change		Yield Day of Release
May 22, 2013	Minutes of the FOMC	105.359	104.672	(0.687	)	2.65	%
May 28, 2013	Minutes of the Fed Board's discount rate meetings	104.578	103.516	(1.062	)	2.85	%
June 19, 2013	The Fed issues FOMC statement	103.328	101.984	(1.344	)	3.04	%

During the second quarter of 2013, rates on U.S. Treasuries and swaps also increased, however, not of the same magnitude as Agency RMBS yields, causing Agency RMBS prices to decline considerably more than both U.S. Treasuries and interest rate swaps, creating a dislocation between the value of our assets and hedges. For example, from May 22, 2013, the yield on a Fannie Mae 30 Year 3.5% increased 61 basis points to 3.14% at June 30, 2013, while the rate on a 4 year interest rate swap increased only 47 basis points to 1.20% at June 30, 2013.

The impact of the market's reaction to the Federal Reserve's indication of its intention to begin tapering QE3 and the dislocation of Agency RMBS and swap rates on our results of operations is discussed in detail below.

Three Months Ended June 30, 2013 Compared to the Three Months Ended June 30, 2012

Net Income (Loss) Available to Common Shares. Net income (loss) available to common shares decreased $504.0 million to a net loss of $402.3 million for the three months ended June 30, 2013, compared to net income of $101.7 million for the three months ended June 30, 2012. The major components of this decrease are detailed below.

Investment Income. Investment income, which primarily consists of interest income on Agency RMBS, increased by $9.9 million to $81.6 million for the three months ended June 30, 2013, as compared to $71.7 million for the three months ended June 30, 2012. The change in investment income was primarily due to the increased size of our portfolio. During the three months ended June 30, 2013, our average settled Agency RMBS portfolio was $15,974.5 million, compared to $10,738.0 million during the three months ended June 30, 2012. However, the increased income due to the size of our portfolio was partially offset by the decrease in the average settled yield on Agency RMBS. During the three months ended June 30, 2013 and 2012, our average yield on settled Agency RMBS was 2.03% and 2.62%, respectively. The impact of the change in investment income from the increased size of our Agency RMBS portfolio and change in average yield on Agency RMBS portfolio is shown below (in thousands):

Change in Size				Change in Yield				Change in Size & Yield
Change in average settled	$	5,236,520		Change in average yield	(0.59		)%	Change in average settled	$	5,236,520
2012 average yield	2.62		%	2012 average settled	10,737,980			Change in average yield	(0.59		)%
Change	$	34,308		Change	$	(15,910	)	Change	$	(7,759	)
								Total change	$	10,639

Interest Expense. Interest expense increased $5.0 million to $14.0 million for the three months ended June 30, 2013, as compared to $9.0 million for the three months ended June 30, 2012. The increase was due to the increase in our average amounts outstanding under our repurchase agreements and higher interest rates. During the three months ended June 30, 2013 and 2012, our average repurchase agreements were $13,871.4 million and $9,497.3 million, respectively. In addition, we had an average rate on our repurchase agreements of 0.41% and 0.38% during the three months ended June 30, 2013 and 2012, respectively. The impact of the change in interest expense from the increase in our average repurchase agreements outstanding and change in average rate on repurchase agreements is shown below (in thousands):

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Change in Size				Change in Rate				Change in Size & Yield
Change in average outstanding	$	4,374,137		Change in average rate	0.03		%	Change in average outstanding	$	4,374,137
2012 average rate	0.38		%	2012 average outstanding	9,497,267			Change in average rate	0.03		%
Change	$	4,142		Change	$	624		Change	$	288
								Total change	$	5,054

Operating Expenses. For the three months ended June 30, 2013, operating expenses increased by $0.4 million to $5.7 million compared to $5.3 million for the three months ended June 30, 2012. However, expenses decreased as a percentage of net assets during the three months ended June 30, 2013 to 0.98%, compared to 1.33% during the three months ended June 30, 2012. The decrease in expenses as a percentage of net assets was mainly attributable to our larger asset base. Our average net assets were $2,321.1 million and $1,591.4 million during the three months ended June 30, 2013 and 2012, respectively.

Net Gain (Loss) From Investments. Net gain from investments decreased by $724.9 million to a net loss of $656.3 million for the three months ended June 30, 2013, compared to a gain of $68.6 million for the three months ended June 30, 2012. For the three months ended June 30, 2013, prices of Agency RMBS decreased, while for the three months ended June 30, 2012 prices of Agency RMBS increased. For example, during the three months ended June 30, 2013 the price of a 30 year 3.5% Agency RMBS decreased $4.063 and during the three months ended June 30, 2012 it increased $2.438. However, during the three months ended June 30, 2013, the size of our total Agency RMBS book was significantly larger at an average of $19,944.8 million compared to $13,485.0 million during the three months ended June 30, 2012. Net realized loss from investments, a component of net gain loss from investments, was $211.4 million for the three months ended June 30, 2013, compared to a gain of $61.1 million for the three months ended June 30, 2012. The net realized loss increased as we sold assets to maintain our leverage ratio during the three months ended June 30, 2013.

Drop income is a component of our net gain (loss) from investments on our statement of operations and therefore excluded from Core Earnings. The Company derives drop income from forward settling transactions. Drop income is the difference between the spot price and the forward settlement price for the same security on the 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. During the three months ended June 30, 2013 and 2012, we generated drop income of approximately $32.3 million and $16.0 million, respectively.

During the three months ended June 30, 2013, we sold CLOs with a par value of $2.5 million for a net gain of $1.3 million. We did not sell any CLOs during the three months ended June 30, 2012. As of June 30, 2013, we no longer own any CLOs.

Net Gain (Loss) from Swap and Cap Contracts. Net gain from swap and cap contracts increased by $220.6 million to a gain of $196.2 million for the three months ended June 30, 2013, compared to a loss of $24.4 million for the three months ended June 30, 2012. The increase in net gain on swap and cap contracts was primarily due to the change in swap rates combined with the change in the size of our interest rate swap and cap portfolio. During the three months ended June 30, 2013 and 2012, our average interest rate swap and cap notional amount was $13,415.0 million and $6,265.0 million, respectively. During the three months ended June 30, 2013 and 2012, three year swap rates increased by 28 basis points and decreased by 13 basis points, respectively.

Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

Net Income (Loss) Available to Common Shares. Net income (loss) available to common shares decreased $590.7 million to a net loss of $419.9 million for the six months endedJune 30, 2013, compared to net income of $170.8 million for the six months endedJune 30, 2012. The major components of this decrease are detailed below.

Investment Income. Investment income, which primarily consists of interest income on Agency RMBS, increased by $17.6 million to $154.7 million for the six months endedJune 30, 2013, as compared to $137.1 million for the six months endedJune 30, 2012. The change in investment income was primarily due to the increased size of our portfolio. During the six months endedJune 30, 2013, our average settled Agency RMBS portfolio was $16,067.1 million, compared to $10,052.9 million during the six months endedJune 30, 2012. However, the increased income due to the size of our portfolio was partially offset by the decrease in the average yield on settled Agency RMBS. During the six months endedJune 30, 2013 and 2012, our average yield on settled Agency RMBS was 1.91% and 2.68%, respectively. The impact of the change in investment income from the increased size of our Agency RMBS portfolio and change in average yield on Agency RMBS portfolio is shown below (in thousands):

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Change in Size				Change in Yield				Change in Size & Yield
Change in average settled	$	6,014,214		Change in average yield	(0.77		)%	Change in average settled	$	6,014,214
2012 average yield	2.68		%	2012 average settled	10,052,857			Change in average yield	(0.77		)%
Change	$	80,465		Change	$	(38,712	)	Change	$	(23,160	)
								Total change	$	18,593

Interest Expense. Interest expense increased $13.3 million to $29.1 million for the six months endedJune 30, 2013, as compared to $15.8 million for the six months endedJune 30, 2012. The increase was due to the increase in our average amounts outstanding under our repurchase agreements and higher interest rates. During the six months ended ended June 30, 2013 and 2012, our average repurchase agreements were $14,022.3 million and $8,933.0 million, respectively. In addition, we had an average rate on our repurchase agreements of 0.41% and 0.35% during the six months endedJune 30, 2013 and 2012, respectively. The impact of the change in interest expense from the increase in our average repurchase agreements outstanding and change in average rate on repurchase agreements is shown below (in thousands):

Change in Size				Change in Rate				Change in Size & Yield
Change in average outstanding	$	5,089,348		Change in average rate	0.06		%	Change in average outstanding	$	5,089,348
2012 average rate	0.35		%	2012 average outstanding	8,932,952			Change in average rate	0.06		%
Change	$	9,028		Change	$	2,678		Change	$	1,526
								Total change	$	13,232

Operating Expenses. For the six months endedJune 30, 2013, operating expenses increased by $0.8 million to $11.2 million, compared to $10.4 million for the six months endedJune 30, 2012. However, expenses decreased as a percentage of net assets during the six months endedJune 30, 2013 to 0.96%, compared to 1.39% during the six months endedJune 30, 2012. The decrease in expenses as a percentage of net assets was mainly attributable to our larger asset base. Our average net assets were $2,341.7 million and $1,494.9 million during the six months endedJune 30, 2013 and 2012, respectively.

Net Gain (Loss) From Investments. Net gain from investments decreased by $836.8 million to a net loss of $735.1 million for the six months endedJune 30, 2013, compared to $101.7 million gain for the six months endedJune 30, 2012. For the six months endedJune 30, 2013, prices of Agency RMBS decreased, while for the six months endedJune 30, 2012 prices of Agency RMBS increased. For example, during the six months ended June 30, 2013 the price of a 30 year 3.5% Agency RMBS decreased $5.125 and during the six months ended June 30, 2012 it increased $2.313. However, during the six months endedJune 30, 2013, the size of our total Agency RMBS book was significantly larger at an average of $20,091.8 million compared to $12,624.3 million during the six months endedJune 30, 2012. Net realized loss from investments, a component of net gain loss from investments, was $164.7 million for the six months ended June 30, 2013, compared to a gain of $66.3 million for the six months ended June 30, 2012. This increased as we sold assets to maintain our leverage ratio during the six months ended June 30, 2013.

During the six months endedJune 30, 2013 and 2012, we generated drop income of approximately $59.6 million and $31.0 million, respectively.

During the six months endedJune 30, 2013, we sold CLOs with a par value of $13.5 million for a net gain of $6.4 million. We did not sell any CLOs during the six months endedJune 30, 2012. As of June 30, 2013 we no longer own any CLOs.

Net Gain (Loss) from Swap and Cap Contracts. Net gain from swap and cap contracts increased by $248.1 million to a gain of $206.3 million for the six months endedJune 30, 2013, compared to a loss of $41.8 million for the six months endedJune 30, 2012. The increase in net gain on swap and cap contracts was primarily due to the change in swap rates combined with the change in the size of our interest rate swap and cap portfolio. During the six months endedJune 30, 2013 and 2012, our average interest rate swap and cap notional amount was $12,547.1 million and $5,911.4 million, respectively. During the six months endedJune 30, 2013 and 2012, three year swap rates increased by 32 basis points and decreased by 20 basis points, respectively.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations for repurchase agreements, interest expense on repurchase agreements and the office lease at June 30, 2013 and December 31, 2012 (dollars in thousands).

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June 30, 2013	Within One Year		One to Three Years		Three to Five Years		Total
Repurchase agreements	$	13,809,319	$	—	$	—	$	13,809,319
Interest expense on repurchase agreements, based on rates at June 30, 2013	9,454		—		—		9,454
Long term operating lease obligation	324		—		—		324
Total	$	13,819,097	$	—	$	—	$	13,819,097

December 31, 2012	Within One Year		One to three Years		Three to Five Years		Total
Repurchase agreements	$	13,981,307	$	—	$	—	$	13,981,307
Interest expense on repurchase agreements, based on rates at December 31, 2012	15,173		—		—		15,173
Long term operating lease obligation	320		162		—		482
Total	$	13,996,800	$	162	$	—	$	13,996,962

We enter into interest rate swap and cap contracts as a means of mitigating our interest rate risk in forecasted interest expense associated with repurchase agreements for the term of the swap or cap contract. Effective June 2013, we began clearing interest rate swaps on exchanges, such as the Chicago Mercantile Exchange. For interest rate swaps cleared on the exchanges, we will no longer face the original trade counterparty, but will instead face the exchange. This should greatly reduce the risk of counterparty default for us. However, we will continue to have credit exposure to banks and broker dealers on our interest rate caps and swaps that are not cleared on an exchange. At June 30, 2013 and December 31, 2012, we had the following interest rate swap and cap contracts not cleared on an exchange (dollars in thousands):

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As of June 30, 2013

Counterparty	Total Notional		Fair Value			Amount At Risk  (1)			Weighted Average Maturity in Years
Barclays Bank plc	$	1,000,000	$	54,987		$	(1,542	)	5.9
BNP Paribas	250,000		5,077			4,512			4.2
Credit Suisse International	2,050,000		77,639			5,957			5.5
Deutsche Bank	1,340,000		3,502			13,982			2.1
Goldman Sachs	1,800,000		(23,298		)	18,664			1.0
ING Capital Markets, LLC	300,000		17,175			775			6.0
Morgan Stanley Capital Markets	750,000		7,746			3,890			4.1
Nomura Global Financial Products, Inc.	550,000		(13,606		)	6,036			2.1
The Bank of Nova Scotia	750,000		44,692			(1,928		)	5.9
The Royal Bank of Scotland plc	3,100,000		95,975			137			3.7
UBS AG	300,000		17,008			818			6.0
Wells Fargo Bank, N.A.	300,000		14,595			(729		)	5.9
Total	$	12,490,000	$	301,492		$	50,572

As of December 31, 2012

Counterparty	Total Notional		Fair Value			Amount At Risk(1)		Weighted Average Maturity in Years
BNP Paribas	$	250,000	$	26		$	2,159	4.7
Credit Suisse International	2,050,000		27,922			13,190		6.0
Deutsche Bank	1,340,000		(10,733		)	16,369		2.6
Goldman Sachs	1,800,000		(34,105		)	20,416		1.5
ING Capital Markets, LLC	300,000		8,685			585		6.5
Morgan Stanley Capital Markets	1,250,000		29,135			16,474		6.6
Nomura Global Financial Products, Inc.	550,000		(19,629		)	6,336		2.6
The Bank of Nova Scotia	250,000		33			1,627		4.7
The Royal Bank of Scotland plc	2,500,000		7,543			9,457		2.4
UBS AG	300,000		9,165			925		6.5
Wells Fargo Bank, N.A.	300,000		7,552			1,449		6.4
Total	$	10,890,000	$	25,594		$	88,987

 _______

(1) Equal to the fair value of pledged securities plus accrued interest income, minus the fair value of the interest rate swap and cap and accrued interest income and expense.

We enter into certain contracts that contain a variety of indemnification obligations, principally with our brokers and

counterparties to interest rate swap contracts and repurchase agreements. The maximum potential future payment amount we

could be required to pay under these indemnification obligations is unlimited. We have not incurred any costs to defend

lawsuits or settle claims related to these indemnification obligations. As a result, the estimated fair value of these agreements is

minimal. Accordingly, we recorded no liabilities for these agreements as of June 30, 2013 and December 31, 2012. In addition, as of June 30, 2013 and December 31, 2012, we had $6,126.2 million and $4,515.5 million payable for securities purchased, respectively, a portion of which either was or will be financed through repurchase agreements. A summary of our payable for securities purchased as of June 30, 2013 and December 31, 2012 is included in the “Financial Condition—Liabilities” section.

Off-Balance Sheet Arrangements

As of June 30, 2013 and December 31, 2012, we did not maintain any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, special purpose or variable interest entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Further, as of June 30, 2013 and December 31, 2012, we had not guaranteed any obligations of unconsolidated entities or entered into any commitment or had any intent to provide funding to any such entities.

Liquidity and Capital Resources

As of June 30, 2013 and December 31, 2012, we had approximately $1,332.9 million and $1,519.3 million, respectively, in Agency RMBS, U.S. Treasury securities and cash and cash equivalents available to satisfy future margin calls. To date, we have maintained sufficient liquidity to meet margin calls, and we have never been unable to satisfy a margin call, although no assurance can be given that we will be able to satisfy requests from our lenders to post additional collateral in the future.

Our primary sources of funds are borrowings under repurchase arrangements and monthly principal repayments and interest payments on our investments. Other sources of funds may include proceeds from debt and equity offerings and asset sales. As of June 30, 2013 and December 31, 2012, we had repurchase agreements totaling $13,809.3 million and $13,981.3 million, respectively, with a weighted average borrowing rate of 0.39% and 0.48%, respectively. In addition, during the six months endedJune 30, 2013 and 2012, we received $1,632.5 million and $1,194.9 million of principal repayments, respectively, and $156.9 million and $129.5 million of interest payments, respectively. We held cash and cash equivalents of $11.3 million and $13.9 million at June 30, 2013 and December 31, 2012, respectively.

During the six months ended June 30, 2013 and 2012, our operations provided (used) net cash of $61.3 million and $(2,319.8) million, respectively. During the six months ended June 30, 2013 and 2012, we had net purchases (sales) of securities (net of purchases, sales and principal repayments) of $(2,826.9) million and $4,634.6 million, respectively. As prices of Agency RMBS declined in the second quarter of 2013, we took a prudent risk management approach and maintained our leverage discipline by selling Agency RMBS to maintain our leverage at its current level of 7.5 to one at June 30, 2013. During the six months ended June 30, 2013, we maintained a liquidity level greater than 44% of net assets.

Through the DSPP, stockholders may purchase additional shares of common stock by reinvesting some or all of the cash dividends received on shares of common stock. Stockholders may also make optional cash purchases of shares of common stock subject to certain limitations detailed in the plan prospectus. We did not issue any shares under the plan during the six months ended June 30, 2013. During the six months ended June 30, 2012 we issued 3.0 million shares under the plan, raising approximately $41.1 million of net proceeds. As of June 30, 2013 and December 31, 2012, there were approximately 4.1 million shares available for issuance under the DSPP.

On June 7, 2011 we established the EPP whereby, from time to time, we may publicly offer and sell up to 15.0 million shares of our common stock in at-the-market transactions and/or privately negotiated transactions with JMP Securities LLC acting as sales agent. For the six months ended June 30, 2013, we did not issue any shares under the plan. During the six months ended June 30, 2012, we issued 5.9 million shares under the plan raising approximately $79.6 million. As of June 30, 2013 and December 31, 2012, there were approximately 3.1 million shares of common stock remained available for issuance under the EPP.

On November 15, 2012, we announced that our board of directors authorized the repurchase of shares of our common stock having an aggregate value of up to $250 million. We intend to repurchase shares only when the purchase price is less than our estimate of our current net asset value per share of our common stock. For the six months ended June 30, 2013, we repurchased 2,469,468 shares with a weighted average purchase price of $10.64, or approximately $26.3 million in the aggregate. We did not make any repurchases during 2012.

The following tables present certain information regarding our risk exposure on our repurchase agreements as of June 30, 2013 and December 31, 2012 (dollars in thousands):

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June 30, 2013

Counterparty	Total Outstanding Borrowings		% of Total		% of Net Assets At Risk (1)		Weighted Average Maturity in Days
Bank of America Securities LLC	$	894,094	6.5	%	2.3	%	27
Barclays Capital, Inc.	938,756		6.8		2.3		39
BNP Paribas Securities Corp	957,722		6.9		2.5		36
Cantor Fitzgerald & Co.	75,696		0.5		0.2		15
Citigroup Global Markets, Inc.	522,427		3.8		1.4		83
Credit Suisse Securities (USA) LLC	642,940		4.7		1.7		43
CRT Capital Group LLC	45,046		0.3		0.1		15
Daiwa Securities America, Inc.	308,874		2.2		0.8		52
Deutsche Bank Securities, Inc.	378,037		2.7		1.1		18
Goldman Sachs & Co.	707,348		5.1		1.7		44
Guggenheim Liquidity Services, LLC	303,902		2.2		0.8		28
Industrial and Commercial Bank of China Financial Services LLC	822,802		6.0		2.2		30
ING Financial Markets LLC	712,633		5.2		2.0		42
Jefferies & Company, Inc.	65,541		0.5		0.2		43
J.P. Morgan Securities LLC	258,233		1.9		0.5		15
KGS Alpha Capital Markets	119,065		0.9		0.4		86
LBBW Securities LLC	134,808		1.0		0.4		24
Mitsubishi UFJ Securities (USA), Inc.	582,819		4.2		1.6		51
Mizuho Securities USA, Inc.	528,177		3.8		1.4		48
Morgan Stanley & Co. Inc.	732,724		5.3		1.9		51
Nomura Securities International, Inc.	536,926		3.9		1.4		80
RBC Capital Markets, LLC	803,772		5.8		2.3		54
The Royal Bank of Scotland PLC	189,697		1.4		0.5		10
Bank of Nova Scotia	654,350		4.7		1.1		44
South Street Securities LLC	370,565		2.7		1.3		40
UBS Securities LLC	648,274		4.7		1.8		61
Wells Fargo Securities, LLC	874,091		6.3		1.4		12
	$	13,809,319	100.0	%	35.3	%

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December 31, 2012

Counterparty	Total Outstanding Borrowings		% of Total		% of Net Assets At Risk (1)		Weighted Average Maturity in Days
Bank of America Securities LLC	$	1,143,279	8.2	%	2.4	%	16
Bank of Nova Scotia	660,889		4.7		1.1		12
Barclays Capital, Inc.	1,129,106		8.1		2.3		30
BNP Paribas Securities Corp	662,360		4.7		1.5		17
Citigroup Global Markets, Inc.	463,815		3.3		1.1		21
Credit Suisse Securities (USA) LLC	645,179		4.6		1.2		15
Daiwa Securities America, Inc.	305,954		2.2		0.7		22
Deutsche Bank Securities, Inc.	539,094		3.8		1.4		21
Goldman Sachs & Co.	1,058,174		7.6		2.4		17
Guggenheim Liquidity Services, LLC	281,225		2.0		0.6		22
Industrial and Commercial Bank of China Financial Services LLC	808,414		5.8		1.7		20
ING Financial Markets LLC	377,353		2.7		0.9		14
KGS Alpha Capital Markets	138,697		1.0		0.4		19
LBBW Securities LLC	140,953		1.0		0.3		28
Mitsubishi UFJ Securities (USA), Inc.	627,315		4.5		1.4		17
Mizuho Securities USA, Inc.	520,638		3.7		1.1		18
Morgan Stanley & Co. Inc.	634,179		4.5		1.6		17
Nomura Securities International, Inc.	623,556		4.5		1.5		21
RBC Capital Markets, LLC	791,610		5.7		1.8		17
South Street Securities LLC	375,289		2.7		1.1		18
The Royal Bank of Scotland PLC	167,604		1.2		0.4		9
UBS Securities LLC	936,333		6.7		2.3		38
Wells Fargo Securities, LLC	950,291		6.8		1.3		13
Total	$	13,981,307	100.0	%	30.5	%

____________________

(1) Equal to the fair value of pledged securities plus accrued interest income, minus the sum of repurchase agreement liabilities and accrued interest expense divided by net assets.

Our repurchase agreements contain typical provisions and covenants as set forth in the standard master repurchase agreement published by the Securities Industry and Financial Markets Association. Our repurchase agreements generally require us to transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contain events of default in cases where we or the counterparty breaches our respective obligations under the agreement.

We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business similar to other entities in the specialty finance business. We receive two types of margin calls under our repurchase agreements. The first type, which are known as “factor calls,” are margin calls that occur each month and relate to the timing difference between the reduction of principal balances of our Agency RMBS, due to monthly principal payments on the underlying mortgages, and the receipt of the corresponding cash. The second type of margin call we may receive is a “valuation call”, which occurs due to market and interest rate movements. Both factor and valuation margin calls occur if the total value of our assets pledged as collateral to a counterparty drops beyond a threshold level, typically between $100,000 and $500,000. Both types of margin calls require a dollar for dollar restoration of the margin shortfall. Conversely, we may initiate margin calls to our counterparties when the value of our assets pledged as collateral with a counterparty increases above the threshold level, thereby increasing our liquidity. All unrestricted cash and cash equivalents, plus any unpledged securities, are available to satisfy margin calls.

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An event of default or termination event under the standard master repurchase agreement would give our counterparty the option to terminate all repurchase transactions existing with us and make any amount due by us to the counterparty to be payable immediately.

We have made and intend to continue to make regular quarterly distributions of all or substantially all of our REIT taxable income to holders of our common stock. In order to qualify as a REIT and to avoid federal corporate income tax on the income that we distribute to our stockholders, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, on an annual basis. This requirement can impact our liquidity and capital resources.

For our short term (one year or less) and long term liquidity and capital resource requirements, we also rely on the cash flow from operations, primarily monthly principal and interest payments to be received on our Agency RMBS, as well as any securities offerings authorized by our board of directors.

Based on our current portfolio, leverage rate and available borrowing arrangements, we believe that our cash flow from operations and the utilization of borrowings will be sufficient to enable us to meet anticipated short term (one year or less) liquidity requirements such as funding our investment activities, funding our distributions to stockholders and for general corporate expenses. However, an increase in prepayment rates substantially above our expectations could cause a temporary liquidity shortfall due to the timing of the necessary margin calls on the financing arrangements and the actual receipt of the cash related to principal paydowns. If our cash resources are at any time insufficient to satisfy our liquidity requirements, we may have to issue debt or additional equity securities or sell Agency RMBS in our portfolio. If required, the sale of Agency RMBS at prices lower than their amortized cost would result in realized losses. We believe that we have additional capacity through repurchase agreements to leverage our equity further should the need for additional short term (one year or less) liquidity arise.

We may increase our capital resources by obtaining long term credit facilities or making public or private offerings of equity or debt securities. Such financing will depend on market conditions for capital raises and for the investment of any proceeds. If we are unable to renew, replace or expand our sources of financing on substantially similar terms, it may have an adverse effect on our business and results of operations.

Qualitative and Quantitative Disclosures about Short Term Borrowings

The following table discloses quantitative data about our short term borrowings under repurchase agreements during the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2013			2012			2013			2012
Outstanding at period end	$	13,809		$	9,763		$	13,809		$	9,763
Weighted average rate at period end	0.39		%	0.39		%	0.39		%	0.39		%
Average outstanding during period (1)	$	13,871		$	9,497		$	14,022		$	8,933
Weighted average rate during period	0.41		%	0.38		%	0.41		%	0.35		%
Largest month end balance during period	$	14,050		$	9,996		$	14,544		$	9,996

_______________

(1) Calculated based on the average month end balance during the period.

The Company maintained consistent borrowing levels throughout the periods shown above. The Company's borrowing rates were stable during the three months ended June 30, 2013 and 2012 and the six months ended June 30, 2013. However, for the six months endedJune 30, 2012 the Company's borrowing rate was lower by four basis points at 0.35% as compared to 0.39% at June 30, 2012. This is consistent with the change in short rates during the period. During the six months endedJune 30, 2012, one month LIBOR decreased five basis points ending at 0.25% at June 30, 2012.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and our distributions are determined by our board of directors based in part on our REIT taxable income as calculated according to the requirements of the Internal Revenue Code. In each case, our activities and balance sheet are measured with reference to fair value without considering inflation.

43

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of June 30, 2013 and December 31, 2012, the primary component of our market risk was interest rate risk, as described below. While we do not seek to avoid risk completely, we do believe that risk can be quantified from historical experience and seek to actively manage risk, to earn sufficient compensation to justify taking risks and to maintain capital levels consistent with the risks we undertake. Our board of directors exercises oversight of risk management in many ways, including overseeing our senior management’s risk-related responsibilities and reviewing management and investment policies and performance against these policies and related benchmarks. See “Business—Risk Management” in our annual report on Form 10-K for the fiscal year ended December 31, 2012 for a further discussion of our risk mitigation practices.

Interest Rate Risk

We are subject to interest rate risk in connection with our investments in Agency RMBS collateralized by ARMs, hybrid ARMs and fixed rate mortgage loans and our related debt obligations, which are generally repurchase agreements of limited duration that are periodically refinanced at current market rates. We seek to mitigate this risk through utilization of derivative contracts, primarily interest rate swap and cap agreements.

Effect on Net Investment Income. We fund our investments in long term Agency RMBS collateralized by ARMs, hybrid ARMs and fixed rate mortgage loans with short term borrowings under repurchase agreements. During periods of rising interest rates, the borrowing costs associated with those Agency RMBS tend to increase while the income earned on such Agency RMBS (during the fixed rate component of such securities) may remain substantially unchanged. This results in a narrowing of the net interest spread between the related assets and borrowings and may even result in losses.

We are a party to the interest rate swap and cap contracts as of June 30, 2013 and December 31, 2012 described in detail under Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in this quarterly report on Form 10-Q.

Hedging techniques are partly based on assumed levels of prepayments of our Agency RMBS. If prepayments are slower or faster than assumed, the life of the Agency RMBS will be longer or shorter, which would reduce the effectiveness of any hedging strategies we may use and may cause losses on such transactions.

Effect on Fair Value. Another component of interest rate risk is the effect changes in interest rates will have on the fair value of our assets. We face the risk that the fair value of our assets will increase or decrease at different rates than that of our liabilities, including our hedging instruments.

We primarily assess our interest rate risk by estimating the duration of our assets and the duration of our liabilities. Duration essentially measures the market price volatility of financial instruments as interest rates change. 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.

Extension Risk. We invest in Agency RMBS collateralized by hybrid ARMs, which have interest rates that are fixed for the first few years of the loan (typically three, five, seven or 10 years) and thereafter reset periodically on the same basis as Agency RMBS collateralized by ARMs. We compute the projected weighted average life of our Agency RMBS collateralized by hybrid ARMs based on assumptions regarding the rate at which the borrowers will prepay the underlying mortgages. In general, when Agency RMBS collateralized by fixed rate or hybrid ARMs is acquired with borrowings, we may, but are not required to, enter into an interest rate swap agreement or other hedging instrument that effectively fixes our borrowing costs for a period close to the anticipated weighted average life of the fixed rate portion of the related Agency RMBS. This strategy is designed to protect us from rising interest rates by fixing our borrowing costs for the duration of the fixed rate period of the collateral underlying the related Agency RMBS.

We have structured our swaps to expire in conjunction with the estimated weighted average life of the fixed period of the mortgages underlying our Agency RMBS portfolio. However, in a rising interest rate environment, the weighted average life of the fixed rate mortgages underlying our Agency RMBS could extend beyond the term of the swap agreement or other hedging instrument. This could have a negative impact on our results from operations, as borrowing costs would no longer be fixed after the term of the hedging instrument while the income earned on the remaining Agency RMBS would remain fixed for a period of time. This situation may also cause the market value of our Agency RMBS to decline with little or no offsetting gain from the related hedging transactions. In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.

Interest Rate Cap Risk. Both the ARMs and hybrid ARMs that collateralize our Agency RMBS are typically subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the security’s interest yield may change during any given period. However, our borrowing costs will not be subject to similar restrictions. Therefore, in a period of increasing interest rates, the interest costs on our borrowings could increase without limitation by caps while the interest rate yields on our Agency RMBS would effectively be limited by caps. This problem will be magnified to the extent that we acquire

44

Agency RMBS that are collateralized by hybrid ARMs that are not fully indexed. In addition, the underlying mortgages may be subject to periodic payment caps that result in some portion of the interest being deferred and added to the principal outstanding. This could result in our receipt of less cash income on our Agency RMBS than we need in order to pay the interest cost on our related borrowings. These factors could lower our net investment income or cause a net loss during periods of rising interest rates, which would harm our financial condition, cash flows and results of operations.

Interest Rate Mismatch Risk. We intend to fund a substantial portion of our acquisitions of Agency RMBS with borrowings that, after the effect of hedging, have interest rates based on indices and repricing terms similar to, but of somewhat shorter maturities than, the interest rate indices and repricing terms of the Agency RMBS. Thus, we anticipate that in most cases the interest rate indices and repricing terms of our Agency RMBS and our funding sources will not be identical, thereby creating an interest rate mismatch between assets and liabilities. Therefore, our cost of funds would likely rise or fall more quickly than would our earnings rate on assets. During periods of changing interest rates, such interest rate mismatches could negatively impact our financial condition, cash flows and results of operations. To mitigate interest rate mismatches, we may utilize the hedging strategies discussed above.

Our analysis of risks is based on management’s experience, estimates, models and assumptions. These analyses rely on models which utilize estimates of fair value and interest rate sensitivity. Actual economic conditions or implementation of investment decisions by our management may produce results that differ significantly from the estimates and assumptions used in our models and the projected results reflected herein.

Prepayment Risk

Prepayments are the full or partial repayment of principal prior to the original contractual maturity of a mortgage loan and typically occur due to refinancing of mortgage loans. Prepayment rates for existing Agency RMBS generally increase when prevailing mortgage interest rates fall. In addition, prepayment rates on Agency RMBS collateralized by ARMs and hybrid ARMs generally increase when the difference between long term and short term interest rates declines or becomes negative. Additionally, we currently own Agency RMBS that were purchased at a premium. The prepayment of such Agency RMBS at a rate faster than anticipated would result in a write-off of any remaining capitalized premium amount.

We seek to mitigate our prepayment risk by investing in Agency RMBS with (i) a variety of prepayment characteristics, (ii) prepayment prohibitions and penalties and (iii) prepayment protections, as well as by balancing Agency RMBS purchased at a premium with Agency RMBS purchased at a discount.

Effect on Fair Value and Net Income

Another component of interest rate risk is the effect changes in interest rates will have on the fair value of our assets and our net income exclusive of the effect on fair value. We face the risk that the fair value of our assets and net investment income will increase or decrease at different rates than that of our liabilities, including our hedging instruments.

We primarily assess our interest rate risk by estimating the duration of our assets and the duration of our liabilities. Duration essentially measures the market price volatility of financial instruments as interest rates change. We generally calculate duration using various financial models and empirical data. Different models and methodologies can produce different duration numbers for the same securities.

The following sensitivity analysis table shows the estimated impact of our interest rate-sensitive investments and repurchase agreement liabilities on the fair value of our assets and our net income, exclusive of the effect of changes in fair value on our net income, at June 30, 2013 and December 31, 2012, assuming a static portfolio and that rates instantaneously fall 25, 50 and 75 basis points and rise 25, 50 and 75 basis points.

45

June 30, 2013

Change in Interest Rates	Projected Change in the Fair Value of Our Assets (excluding hedging instruments)*		Projected Change in the Fair Value of Our Assets (including hedging instruments)*		Projected Change in Our Net Income
- 75 basis points	3.06	%	1.70	%	9.70	%
- 50 basis points	2.29	%	1.42	%	7.45	%
- 25 basis points	1.27	%	0.75	%	3.03	%
No Change	—	%	—	%	—	%
+ 25 basis points	(1.32	)%	(0.79	)%	(12.77	)%
+ 50 basis points	(2.67	)%	(1.62	)%	(24.06	)%
+ 75 basis points	(4.05	)%	(2.45	)%	(35.34	)%

December 31, 2012

Change in Interest Rates	Projected Change in the Fair Value of Our Assets (excluding hedging instruments)*		Projected Change in the Fair Value of Our Assets (including hedging instruments)*		Projected Change in Our Net Income
- 75 basis points	0.74	%	(0.08	)%	13.32	%
- 50 basis points	0.80	%	0.24	%	10.66	%
- 25 basis points	0.56	%	0.24	%	5.33	%
No Change	—	%	—	%	—	%
+ 25 basis points	(0.70	)%	(0.37	)%	(13.32	)%
+ 50 basis points	(1.53	)%	(0.86	)%	(26.64	)%
+ 75 basis points	(2.49	)%	(1.45	)%	(39.96	)%

_____________

* Analytics provided by The Yield Book^® Software

While the charts above reflect the estimated immediate impact of interest rate increases and decreases on a static portfolio, we rebalance our portfolio from time to time either to take advantage or minimize the impact of changes in interest rates. Generally, our interest rate swaps reset in the quarter following changes in interest rates. It is important to note that the impact of changing interest rates on fair value and net income can change significantly when interest rates change beyond 75 basis points from current levels. Therefore, the volatility in the fair value of our assets could increase significantly when interest rates change beyond 75 basis points. In addition, other factors impact the fair value of and net income from our interest rate-sensitive investments and hedging instruments, such as the shape of the yield curve, market expectations as to future interest rate changes and other market conditions. Accordingly, in the event of changes in actual interest rates, the change in the fair value of our assets and our net income would likely differ from that shown above, and such difference might be material and adverse to our stockholders.

Risk Management

Our board of directors exercises its oversight of risk management in many ways, including overseeing our senior management’s risk-related responsibilities, including reviewing management policies and performance against these policies and related benchmarks.

As part of our risk management process, we actively manage the interest rate, liquidity, prepayment and counterparty risks associated with our Agency RMBS portfolio. We seek to mitigate our interest rate risk exposure by entering into various hedging instruments in order to minimize our exposure to potential interest rate mismatches between the interest we earn on our investments and our borrowing costs.

We seek to mitigate our liquidity risks by monitoring our liquidity position on a daily basis and maintaining a prudent level of leverage, which we currently consider to be between six and 10 times the amount of net assets in our overall portfolio, based on current market conditions and various other factors, including the health of the financial institutions that lend to us under our repurchase agreements and the presence of special liquidity programs provided by domestic and foreign central banks.

We seek to mitigate our prepayment risk by investing in Agency RMBS with (i) a variety of prepayment characteristics, (ii) prepayment prohibitions and penalties and (iii) prepayment protections, as well as by balancing Agency RMBS purchased at a premium with Agency RMBS purchased at a discount.

46

We seek to mitigate our counterparty risk by (i) diversifying our exposure across a broad number of counterparties, (ii) limiting our exposure to any one counterparty and (iii)  monitoring the financial stability of our counterparties.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2013, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

There have been no changes in our internal controls over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

The Company is not currently subject to any material legal proceedings.

Item 1A. Risk Factors

Separate legislation has been introduced in both houses of the U.S. congress, which would, among other things, revoke the charters of Fannie Mae and Freddie Mac, and we could be materially adversely affected if these proposed laws were enacted. 

On June 25, 2013, a bipartisan group of senators introduced the Housing Finance Reform and Taxpayer Protection Act of 2013, which may serve as a catalyst for congressional discussion on the reform of Fannie Mae and Freddie Mac, to the U.S. Senate.  On July 11, 2013, members of the House Committee on Financial Services introduced the Protecting American Taxpayers and Homeowners Act to the U.S. House of Representatives. 

While the two bills are distinguishable in many respects, they have some notable commonalities. Both bills call for the revocation of the charters of Fannie Mae and Freddie Mac and seek to increase the opportunities for private capital to participate in, and consequently bear the risk of loss in connection with, government-guaranteed mortgage back securities. Both bills also have considerable support in their respective houses of Congress, which suggests that efforts to reform and possibly eliminate Fannie Mae and Freddie Mac may be gaining momentum. 

The passage of any new legislation affecting Fannie Mae and Freddie Mac may create market uncertainty and reduce the actual or perceived credit quality of securities issued or guaranteed by the U.S. government through a new or existing successor entity to Fannie Mae and Freddie Mac. If the charters of Fannie Mae and Freddie Mac were revoked, it is unclear what effect, if any, this would have on the value of the existing Fannie Mae and Freddie Mac Agency RMBS.  It is also possible that the above-referenced proposed legislation, if made law, could adversely impact the market for securities issued or guaranteed by the U.S. government and the spreads at which they trade.  The foregoing could materially adversely affect the pricing, supply, liquidity and value of our target assets and otherwise materially adversely affect our business, operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

47

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits.

Exhibit Number	Description of Exhibit
3.1‡	Articles Supplementary of 7.50% Series B Cumulative Redeemable Preferred Stock
3.2*	Articles Supplementary Reclassifying Authorized but Unissued Shares of Preferred Stock
4.1‡	Form of Certificate for 7.50% Series B Cumulative Redeemable Preferred Stock
10.1†*	2013 Stock Incentive Plan
10.2†*	Form of Restricted Stock Award Agreements for Directors
10.3†*	Form of Restricted Stock Award Agreement for Employees with Employment Agreements
10.4†*	Form of Restricted Stock Award Agreement for Employees without Employment Agreements
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
Exhibit 101.INS XBRL	Instance Document (1)
Exhibit 101.SCH XBRL	Taxonomy Extension Schema Document (1)
Exhibit 101.CAL XBRL	Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF XBRL	Additional Taxonomy Extension Definition Linkbase Document Created (1)
Exhibit 101.LAB XBRL	Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE XBRL	Taxonomy Extension Presentation Linkbase Document (1)

_________________

*    Filed herewith.

**    Furnished herewith.

†    Compensatory plan or arrangement.

‡ Incorporated by reference from the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2013.

(1) Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Statements of Assets and Liabilities at June 30, 2013 (Unaudited) and December 31, 2012 (Derived from the audited balance sheet at December 31, 2012); (ii) Condensed Statements of Operations (Unaudited) for the three and six months ended June 30, 2013 and 2012; (iii) Condensed Statements of Changes in Net Assets (Unaudited) for the three and six months ended June 30, 2013 and 2012; (iv) Condensed Statements of Cash Flows (Unaudited) for the six months ended June 30, 2013 and 2012; and (v) Condensed Notes to Financial Statements (Unaudited) for the three and six months ended June 30, 2013 and 2012.

48

Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

49

SIGNATURES

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 thereunto duly authorized.

	CYS INVESTMENTS, INC.
Dated: July 19, 2013	BY:	/s/ FRANCES R. SPARK
		Frances R. Spark
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

50

EXHIBIT INDEX

Exhibit Number	Description
3.1‡	Articles Supplementary of 7.50% Series B Cumulative Redeemable Preferred Stock
3.2*	Articles Supplementary Reclassifying Authorized but Unissued Shares of Preferred Stock
4.1‡	Form of Certificate for 7.50% Series B Cumulative Redeemable Preferred Stock
10.1†*	2013 Stock Incentive Plan
10.2†*	Form of Restricted Stock Award Agreements for Directors
10.3†*	Form of Restricted Stock Award Agreement for Employees with Employment Agreements
10.4†*	Form of Restricted Stock Award Agreement for Employees without Employment Agreements
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
Exhibit 101.INS XBRL	Instance Document (1)
Exhibit 101.SCH XBRL	Taxonomy Extension Schema Document (1)
Exhibit 101.CAL XBRL	Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF XBRL	Additional Taxonomy Extension Definition Linkbase Document Created (1)
Exhibit 101.LAB XBRL	Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE XBRL	Taxonomy Extension Presentation Linkbase Document (1)

__________________

 *     Filed herewith.

**    Furnished herewith.

†    Compensatory plan or arrangement.

‡ Incorporated by reference from the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29, 2013.

(1) Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Statements of Assets and Liabilities at June 30, 2013 (Unaudited) and December 31, 2012 (Derived from the audited balance sheet at December 31, 2012); (ii) Condensed Statements of Operations (Unaudited) for the three and six months ended June 30, 2013 and 2012; (iii) Condensed Statements of Changes in Net Assets (Unaudited) for the three and six months ended June 30, 2013 and 2012; (iv) Condensed Statements of Cash Flows (Unaudited) for the six months ended June 30, 2013 and 2012; and (v) Condensed Notes to Financial Statements (Unaudited) for the three and six months ended June 30, 2013 and 2012. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

51

EX-3.2

Exhibit 3.2

CYS INVESTMENTS, INC.

ARTICLES SUPPLEMENTARY

CYS Investments, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: Under a power contained in Article VI of the charter of the Corporation (the “Charter”), the Board of Directors, by duly adopted resolutions, reclassified and designated (i) 450,000 authorized but unissued shares of the Corporation’s 7.75% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”); and (ii) 1,200,000 authorized but unissued shares of the Corporation’s 7.50% Series B Cumulative Redeemable Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”), as shares of undesignated Preferred Stock, $0.01 par value per share (the “Preferred Stock”), of the Corporation, with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as set forth in the Charter.

SECOND: The foregoing shares of Preferred Stock have been reclassified and designated by the Board of Directors under the authority contained in the Charter. After giving effect to such reclassification and designation of Preferred Stock as set forth herein, the Corporation has authority to issue 50,000,000 shares of Preferred Stock, including 3,000,000 shares of Series A Preferred Stock, 8,000,000 shares of Series B Preferred Stock and 39,000,000 shares of Preferred Stock, undesignated as to series.

THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.

FOURTH: The undersigned officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of his or her knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed in its name and on its behalf by the undersigned Thomas A. Rosenbloom, the Corporation’s Secretary, and attested by Richard E. Cleary, the Corporation’s Assistant Secretary this 10th day of June, 2013.

ATTEST:                        CYS INVESTMENTS, INC.

By:    /s/ RICHARD E. CLEARY_______        By:    /s/ THOMAS A. ROSENBLOOM__

Richard E. Cleary                        Thomas A. Rosenbloom    

Assistant Secretary                    Secretary

EX-10.1

Exhibit 10.1

CYS INVESTMENTS, INC.

2013 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

SectionPage

Article I DEFINITIONS...................................................................................................... 1

1.01.Affiliate........................................................................................................    1

1.02.Agreement....................................................................................................    1

1.03.Board............................................................................................................    1

1.04.Change in Control........................................................................................    1

1.05.Code.............................................................................................................    2

1.06.Committee....................................................................................................    2

1.07.Common Stock............................................................................................    2

1.08.Company......................................................................................................    3

1.09.Control Change Date....................................................................................    3

1.10.Corresponding SAR.....................................................................................    3

1.11.Dividend Equivalent Right..........................................................................    3

1.12.Exchange Act...............................................................................................    3

1.13.Fair Market Value........................................................................................    3

1.14.Incentive Award...........................................................................................    4

1.15.Initial Value..................................................................................................    4

1.16.    Option..........................................................................................................    4

1.17.Other Equity-Based Award..........................................................................    4

1.18.Participant....................................................................................................    4

1.19.Performance Goal........................................................................................    5

1.20.Performance Units.......................................................................................    5

1.21.Person...........................................................................................................    5

1.22.Plan..............................................................................................................    6

1.23.SAR..............................................................................................................    6

1.24.Stock Award.................................................................................................    6

1.25.Ten Percent Stockholder..............................................................................    6

Article II PURPOSES.......................................................................................................... 6

Article III ADMINISTRATION.......................................................................................... 7

Article IV ELIGIBILITY..................................................................................................... 8

Article V COMMON STOCK SUBJECT TO PLAN.......................................................... 8

5.01.Common Stock Issued.................................................................................    8

5.02.Aggregate Limit...........................................................................................    8

5.03.Individual Grant Limit.................................................................................    9

5.04.Reallocation of Shares.................................................................................    9

Article VI OPTIONS......................................................................................................... 10

ii

6.01.Award.........................................................................................................    10

6.02.Option Price...............................................................................................    10

6.03.Maximum Option Period...........................................................................    10

6.04.Nontransferability......................................................................................    10

6.05.Transferable Options..................................................................................    11

6.06.Employee Status.........................................................................................    11

6.07.Exercise......................................................................................................    11

6.08.Payment......................................................................................................    11

6.09.Stockholder Rights.....................................................................................    12

6.10.Disposition of Shares.................................................................................    12

Article VII SARS............................................................................................................... 12

7.01.Award.........................................................................................................    12

7.02.Maximum SAR Period...............................................................................    12

7.03.Nontransferability......................................................................................    13

7.04.Transferable SARs.....................................................................................    13

7.05.Exercise......................................................................................................    13

7.06.Employee Status.........................................................................................    14

7.07.Settlement..................................................................................................    14

7.08.Stockholder Rights.....................................................................................    14

7.09.No Reduction of Initial Value....................................................................    14

Article VIII STOCK AWARDS......................................................................................... 14

8.01.Award.........................................................................................................    14

8.02.Vesting........................................................................................................    14

8.03.Employee Status.........................................................................................    15

8.04.Stockholder Rights.....................................................................................    15

Article IX PERFORMANCE UNIT AWARDS................................................................. 16

9.01.Award.........................................................................................................    16

9.02.Earning the Award......................................................................................    16

9.03.Payment......................................................................................................    16

9.04.Stockholder Rights.....................................................................................    16

9.05.Nontransferability......................................................................................    17

9.06.Transferable Performance Units................................................................    17

9.07.Employee Status.........................................................................................    17

Article X OTHER EQUITY–BASED AWARDS.............................................................. 17

10.01.Award.........................................................................................................    17

10.02.Terms and Conditions................................................................................    17

10.03.Payment or Settlement...............................................................................    18

10.04.Employee Status.........................................................................................    18

10.05.Stockholder Rights.....................................................................................    18

Article XI INCENTIVE AWARDS................................................................................... 18

11.01.Award.........................................................................................................    18

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11.02.Terms and Conditions................................................................................    19

11.03.Nontransferability......................................................................................    19

11.04.Employee Status.........................................................................................    19

11.05.Settlement..................................................................................................    19

11.06.Stockholder Rights.....................................................................................    19

Article XII ADJUSTMENT UPON CHANGE IN COMMON STOCK........................... 20

Article XIII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES.................................................................................................    20

Article XIV GENERAL PROVISIONS............................................................................ 21

14.01.Effect on Employment and Service...........................................................    21

14.02.Unfunded Plan...........................................................................................    21

14.03.Rules of Construction................................................................................    21

14.04.Withholding Taxes.....................................................................................    22

14.05.Return of Awards; Repayment...................................................................    23

14.06.REIT Status................................................................................................    23

Article XV CHANGE IN CONTROL............................................................................... 23

15.01.Impact of Change in Control......................................................................    23

15.02.Assumption Upon Change in Control........................................................    23

15.03.Cash-Out Upon Change in Control............................................................    24

15.04.Limitation of Benefits................................................................................    24

Article XVI AMENDMENT.............................................................................................. 26

Article XVII DURATION OF PLAN................................................................................ 26

Article XVIII EFFECTIVE DATE OF PLAN................................................................... 26

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Article IDEFINITIONS

1.01. Affiliate

Affiliate means any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, the Company (including, but not limited to, joint ventures, limited liability companies and partnerships). For this purpose, the term “control” shall mean ownership of 50% or more of the total combined voting power or value of all classes of shares or interests in the entity, or the power to direct the management and policies of the entity, by contract or otherwise.

1.02. Agreement

Agreement means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of a Stock Award, an Incentive Award, an award of Performance Units, an Option, SAR or Other Equity-Based Award granted to such Participant.

1.03. Board

Board means the Board of Directors of the Company.

1.04. Change in Control

“Change in Control” shall mean a change in control of the Company which will be deemed to have occurred after the date hereof if:

Notwithstanding the foregoing, if an award under this Plan constitutes “deferred compensation” under Section 409A of the Code, no payment shall be made under such award on account of a Change in Control unless the occurrence of one or more of the preceding events also constitutes a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the Company’s assets, all as determined in accordance with the regulations under Section 409A of the Code.

1.05. Code

Code means the Internal Revenue Code of 1986, and any amendments thereto.

1.06. Committee

Committee means the Compensation Committee of the Board; provided, however, that if there is no Compensation Committee, then “Committee” means the Board; and provided, further that with respect to awards made to a member of the Board who is not an employee of the Company or an Affiliate, “Committee” means the Board.

1.07. Common Stock

Common Stock means common stock of the Company.

1.08. Company

Company means CYS Investments, Inc., a Maryland corporation.

1.09. Control Change Date

Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the “Control Change Date” is the date of the last of such transactions.

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1.10. Corresponding SAR

Corresponding SAR means an SAR that is granted in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR relates.

1.11. Dividend Equivalent Right

Dividend Equivalent Right means the right, subject to the terms and conditions prescribed by the Committee, of a Participant to receive (or have credited) cash, stock or other property in amounts equivalent to the cash, stock or other property dividends declared on Common Stock with respect to specified Performance Units or shares of Common Stock subject to an Other Equity-Based Award, as determined by the Committee, in its sole discretion. The Committee shall provide that Dividend Equivalent Rights (if any) payable with respect to any award that does not vest or become exercisable solely on account of continued employment or service shall be distributed only when, and to the extent that, the underlying award is vested or exercisable and also may provide that Dividend Equivalent Rights (if any) shall be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested.

1.12. Exchange Act

Exchange Act means the Securities Exchange Act of 1934, as amended.

1.13. Fair Market Value

Fair Market Value means, on any given date, the reported “closing” price of a share of Common Stock as reported on the composite tape of the principal national securities exchange on which the Common Stock is listed or admitted to trading. If, on any given date, the Common Stock is not listed or admitted to trading on a national securities exchange, then Fair Market Value shall be the “closing” price of a share of Common Stock on such other exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted on any exchange, the amount determined by the Committee using any reasonable method in good faith and in accordance with the regulations under Section 409A of the Code. If the Common Stock is listed or admitted to trading but there is no reported sale of Common Stock on such day, then Fair Market Value shall be determined on the immediately preceding day on which sales of Common Stock are reported.

1.14. Incentive Award

Incentive Award means an award under Article XI which, subject to the terms and conditions prescribed by the Committee, entitles the Participant to receive a payment from the Company or an Affiliate.

1.15. Initial Value

Initial Value means, with respect to a Corresponding SAR, the option price per share of the related Option and, with respect to an SAR granted independently of an Option, the price per share of Common Stock as determined by the Committee on the date of grant; provided, however, that the price shall not be less than the Fair Market Value on the date of grant.

1.16. Option

Option means an option that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement.

1.17. Other Equity-Based Award

Other Equity-Based Award means any award other than an Option, SAR, a Performance Unit award or a Stock Award which, subject to such terms and conditions as may be prescribed by the Committee, entitles a Participant to

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receive Common Stock or rights or units valued in whole or in part by reference to, or otherwise based on, Common Stock (including securities convertible into Common Stock).

1.18. Participant

Participant means an employee or officer of the Company or an Affiliate, a member of the Board, or an individual who provides bona fide services to the Company or an Affiliate and who satisfies the requirements of Article IV and is selected by the Committee to receive an award of Performance Units, a Stock Award, an Incentive Award, Option, SAR, Other Equity-Based Award or a combination thereof.

1.19. Performance Goal

Performance Goal means a performance objective that is stated with respect or relating to one or more of the following, alone or in combination: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per share of Common Stock; (v) book value per share of Common Stock; (vi) return on stockholders’ equity; (vii) expense management; (viii) return on investments; (ix) improvements in capital structure; (x) profitability of an identifiable business unit or product; (xi) maintenance or improvement of profit margins; (xii) Fair Market Value; (xiii) dividends per share of Common Stock; (xiv) revenues; (xv) costs; (xvi) cash flow; (xvii) total stockholder return and (xviii) return on assets or net assets.

A Performance Goal may be expressed on an absolute basis or relative to the performance of one or more similarly situated companies or a published index. When establishing Performance Goals, the Committee may exclude any or all special, unusual or extraordinary items as determined under U.S. generally accepted accounting principles, including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, other unusual or non-recurring items and the cumulative effects of accounting changes. To the extent permitted under Section 162(m) of the Code (for any award that is intended to constitute “performance based compensation” under Section 162(m) of the Code), the Committee may also adjust the Performance Goals as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles or such other factors as the Committee may determine.

1.20. Performance Units

Performance Units means an award, in the amount determined by the Committee, stated with reference to a specified or determinable number of shares of Common Stock or other securities or property, that in accordance with the terms of an Agreement entitles the holder to receive a payment for each specified unit equal to the value of the Performance Unit on the date of payment.

1.21. Person

“Person” means any human being, firm, corporation, partnership, or other entity. “Person” also includes any human being, firm, corporation, partnership, or other entity as defined in sections 13(d)(3) and 14(d)(2) of the Exchange Act. Notwithstanding the preceding sentence, the term “Person” does not include (i) the Company or any of its subsidiaries, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Affiliate, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Shares or (v) any person or group as used in Rule 13d-1(b) under the Exchange Act.

1.22. Plan

Plan means this CYS Investments, Inc. 2013 Equity Incentive Plan.

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1.23. SAR

SAR means a stock appreciation right that in accordance with the terms of an Agreement entitles the holder to receive, with respect to each share of Common Stock encompassed by the exercise of the SAR, the excess, if any, of the Fair Market Value at the time of exercise over the Initial Value. References to “SARs” include both Corresponding SARs and SARs granted independently of Options, unless the context requires otherwise.

1.24. Stock Award

Stock Award means shares of Common Stock awarded to a Participant under Article VIII.

1.25. Ten Percent Stockholder

Ten Percent Stockholder means any individual owning more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of a “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424 of the Code) of the Company. An individual shall be considered to own any shares of voting stock owned (directly or indirectly) by or for his or her brothers, sisters, spouse, ancestors or lineal descendants and shall be considered to own proportionately any shares of voting stock owned (directly or indirectly) by or for a corporation, partnership, estate or trust of which such individual is a stockholder, partner or beneficiary.

ARTICLE IIPURPOSES

The Plan is intended to assist the Company and its Affiliates in recruiting and retaining individuals and other service providers with ability and initiative by enabling such persons or entities to participate in the future success of the Company and its Affiliates and to associate their interests with those of the Company and its stockholders. The Plan is intended to permit the grant of both Options qualifying under Section 422 of the Code (“incentive stock options”) and Options not so qualifying, and the grant of SARs, Stock Awards, Incentive Awards, Performance Units, and Other Equity-Based Awards in accordance with the Plan and any procedures that may be established by the Committee. No Option that is intended to be an incentive stock option shall be invalid for failure to qualify as an incentive stock option. The proceeds received by the Company from the sale of Common Stock pursuant to this Plan shall be used for general corporate purposes.

ARTICLE IIIADMINISTRATION

The Plan shall be administered by the Committee. The Committee shall have authority to grant SARs, Stock Awards, Incentive Awards, Performance Units, Options and Other Equity-Based Awards upon such terms (not inconsistent with the provisions of this Plan), as the Committee may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan), on the exercisability of all or any part of an Option or SAR or on the transferability or forfeitability of a Stock Award, an Incentive Award, an award of Performance Units or an Other Equity-Based Award. Notwithstanding any such conditions, the Committee may, in its discretion, accelerate the time at which any Option or SAR may be exercised, or the time at which a Stock Award, an Incentive Award or Other Equity-Based Award may become transferable or nonforfeitable or the time at which an Other Equity-Based Award, an Incentive Award or an award of Performance Units may be settled. In addition, the Committee shall have complete authority to interpret all provisions of this Plan; to prescribe the form of Agreements; to adopt, amend, and rescind rules and regulations pertaining to the administration of the Plan (including rules and regulations that require or allow Participants to defer the payment of benefits under the Plan); and to make all other determinations necessary or advisable for the administration of this Plan. The Committee’s determinations under the Plan (including without limitation, determinations of the individuals to receive awards under the Plan, the form, amount and timing of such awards, the terms and provisions of such awards and the Agreements) need not be uniform and may be made by the Committee selectively among individuals who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated. The express grant in the Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. Any decision made, or action taken, by the Committee in connection

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with the administration of this Plan shall be final and conclusive. The members of the Committee shall not be liable for any act done in good faith with respect to this Plan or any Agreement, Option, SAR, Stock Award, Incentive Award, Other Equity-Based Award or award of Performance Units. All expenses of administering this Plan shall be borne by the Company.

The Committee, in its discretion, may delegate to the Company’s Chief Executive Officer all or part of the Committee’s authority and duties with respect to grants and awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee’s delegate that were consistent with the terms of the Plan and the Committee’s prior delegation. References to the “Committee” in the Plan include the Committee’s delegate to the extent consistent with the Committee’s delegation.

ARTICLE IVELIGIBILITY

Any employee of the Company or an Affiliate (including a trade or business that becomes an Affiliate after the adoption of this Plan) and any member of the Board is eligible to participate in this Plan. In addition, any other individual who provides significant services to the Company or an Affiliate is eligible to participate in this Plan if the Committee, in its sole discretion, determines that the participation of such individual is in the best interest of the Company. The Committee may also grant Options, SARs, Stock Awards, Incentive Awards, Performance Units and Other Equity-Based Awards to an individual as an inducement to such individual becoming eligible to participate in the Plan and prior to the date that the individual first performs services for the Company or an Affiliate, provided that such awards will not become vested or exercisable, and no shares shall be issued or other payment made to such individual with respect to such awards prior to the date the individual first performs services for the Company or an Affiliate.

ARTICLE VCOMMON STOCK SUBJECT TO PLAN

5.01. Common Stock Issued

Upon the award of shares of Common Stock pursuant to a Stock Award, an Other Equity-Based Award or in settlement of an award of Performance Units or Incentive Award, the Company may deliver to the Participant shares of Common Stock from its treasury shares or authorized but unissued Common Stock. Upon the exercise of any Option, SAR or Other Equity-Based Award denominated in Common Stock, the Company may deliver to the Participant (or the Participant’s broker if the Participant so directs), shares of Common Stock from its treasury shares or authorized but unissued Common Stock.

5.02. Aggregate Limit

(a)    The maximum aggregate number of shares of Common Stock that may be issued under this Plan pursuant to the exercise of Options and SARs, the grant of Stock Awards or Other Equity-Based Awards and the settlement of Performance Units and Incentive Awards is 8,500,000 shares.

(b)    The maximum number of shares of Common Stock that may be issued under this Plan in accordance with Section 5.02(a) shall be subject to adjustment as provided in Article XII.

(c)    The maximum number of shares of Common Stock that may be issued upon the exercise of Options that are incentive stock options or Corresponding SARs that are related to incentive stock options shall be determined in accordance with Sections 5.02(a) and 5.02(b).

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5.03. Individual Grant Limit

The maximum number of Options, SARs, Stock Awards, Performance Units or Other Equity-Based Awards that may be granted to an individual in any calendar year shall be (i) 20,000 shares of Common Stock (in the case of a Participant who is a member of the Board but who is not an employee of the Company or an Affiliate) and (ii) 500,000 shares of Common Stock in the case of other Participants. For purposes of this Section 5.03, an Option and Corresponding SAR shall be treated as a single award. The maximum number of shares of Common Stock for which a Participant may be granted Options, SARs, Stock Awards, Performance Units and Other Equity-Based Awards in any calendar year shall be subject to adjustment as provided in Article XII.

5.04. Reallocation of Shares

If any award or grant under the Plan expires, is forfeited or is terminated without having been exercised or is paid in cash without delivery of shares of Common Stock or if, after May 10, 2013, any award or grant under the Cypress Sharpridge Investments, Inc. 2006 Stock Incentive Plan expires, is forfeited or is terminated without having been exercised or is paid in cash without delivery of shares of Common Stock, then any shares of Common Stock covered by such lapsed, cancelled, expired, unexercised or cash-settled portion of such award or grant shall be available for the grant of other Options, SARs, Stock Awards, Other Equity-Based Awards and settlement of Performance Units and Incentive Awards under this Plan. Any shares of Common Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any award granted under the Plan shall increase the number of shares of Common Stock available for future grants or awards. If an SAR is settled with shares of Common Stock, the number of shares of Common Stock authorized for issuance under the Plan shall be reduced by the number of SARs exercised (rather than the number of shares of Common Stock issued upon exercise of the SAR).

ARTICLE VIOPTIONS

6.01. Award

In accordance with the provisions of Article IV, the Committee will designate each individual to whom an Option is to be granted and, subject to Section 5.03, will specify the number of shares of Common Stock covered by such awards.

6.02. Option Price

The price per share of Common Stock purchased on the exercise of an Option shall be determined by the Committee on the date of grant, but shall not be less than the Fair Market Value on the date the Option is granted. Notwithstanding the preceding sentence, the price per share of Common Stock purchased on the exercise of any Option that is an incentive stock option granted to an individual who is a Ten Percent Stockholder on the date such option is granted, shall not be less than one hundred ten percent (110%) of the Fair Market Value on the date the Option is granted. Except as provided in Article XII, the price per share of an outstanding Option may not be reduced (by amendment, cancellation and new grant or otherwise) without the approval of stockholders. In addition, no payment shall be made in cancellation of an Option without the approval of stockholders if, on the date of cancellation, the option price per share exceeds Fair Market Value.

6.03. Maximum Option Period

The maximum period in which an Option may be exercised shall be determined by the Committee on the date of grant except that no Option shall be exercisable after the expiration of ten years from the date such Option was granted. In the case of an incentive stock option granted to a Participant who is a Ten Percent Stockholder on the date of grant, such Option shall not be exercisable after the expiration of five years from the date of grant. The terms of any Option may provide that it is exercisable for a period less than such maximum period.

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6.04. Nontransferability

Except as provided in Section 6.05, each Option granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 6.05, during the lifetime of the Participant to whom the Option is granted, the Option may be exercised only by the Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant.

6.05. Transferable Options

Section 6.04 to the contrary notwithstanding, if the Agreement provides, an Option that is not an incentive stock option may be transferred by a Participant to the Participant’s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Rule 16b-3 under the Exchange Act as in effect from time to time. The holder of an Option transferred pursuant to this Section shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Option except by will or the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or entity or entities.

6.06. Employee Status

For purposes of determining the applicability of Section 422 of the Code (relating to incentive stock options), or in the event that the terms of any Option provide that it may be exercised only during employment or continued service or within a specified period of time after termination of employment or continued service, the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or service.

6.07. Exercise

Subject to the provisions of this Plan and the applicable Agreement, an Option may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Committee shall determine; provided, however, that incentive stock options (granted under the Plan and all plans of the Company and its Affiliates) may not be first exercisable in a calendar year for Common Shares having a Fair Market Value (determined as of the date an Option is granted) exceeding $100,000. An Option granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the Option. The exercise of an Option shall result in the termination of any Corresponding SAR to the extent of the number of shares with respect to which the Option is exercised.

6.08. Payment

Subject to rules established by the Committee and as provided in an Agreement, payment of all or part of the Option price may be made in cash, certified check, by tendering shares of Common Stock or by attestation of ownership of shares of Common Stock, by a broker-assisted cashless exercise or by a “net settlement” of the Option exercise, i.e., by issuance of the number of shares of Common Stock for which the Option is exercised minus the number of shares with a Fair Market Value (determined as of the date of exercise) equal to the aggregate option price or the aggregate option price plus the amount of the income and employment taxes required to be withheld. If Common Stock is used to pay all or part of the Option price, the sum of the cash and cash equivalent and the Fair Market Value (determined as of the date of exercise) of the shares surrendered must not be less than the Option price of the shares for which the Option is being exercised.

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6.09. Stockholder Rights

No Participant shall have any rights as a stockholder with respect to Common Shares subject to an Option until the date of exercise of such Option.

6.10. Disposition of Shares

A Participant shall notify the Company of any sale or other disposition of shares of Common Stock acquired pursuant to an Option that was an incentive stock option if such sale or disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the issuance of the Common Stock to the Participant. Such notice shall be in writing and directed to the Secretary of the Company.

ARTICLE VIISARS

7.01. Award

In accordance with the provisions of Article IV, the Committee will designate each individual to whom SARs are to be granted and will, subject to Section 5.03, specify the number of shares of Common Stock covered by such awards. No Participant may be granted Corresponding SARs (under the Plan and all plans of the Company and its Affiliates) that are related to incentive stock options which are first exercisable in any calendar year for shares of Common Stock having an aggregate Fair Market Value (determined as of the date the related Option is granted) that exceeds $100,000.

7.02. Maximum SAR Period

The term of each SAR shall be determined by the Committee on the date of grant, except that no SAR shall have a term of more than ten years from the date of grant. In the case of a Corresponding SAR that is related to an incentive stock option granted to a Participant who is a Ten Percent Stockholder on the date of grant, such Corresponding SAR shall not be exercisable after the expiration of five years from the date of grant. The terms of any SAR may provide that it has a term that is less than such maximum period.

7.03. Nontransferability

Except as provided in Section 7.04, each SAR granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In the event of any such transfer, a Corresponding SAR and the related Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 7.04, during the lifetime of the Participant to whom the SAR is granted, the SAR may be exercised only by the Participant. No right or interest of a Participant in any SAR shall be liable for, or subject to, any lien, obligation, or liability of such Participant.

7.04. Transferable SARs

Section 7.03 to the contrary notwithstanding, if the Agreement provides, an SAR, other than a Corresponding SAR that is related to an incentive stock option, may be transferred by a Participant to the Participant’s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Rule 16b-3 under the Exchange Act as in effect from time to time. The holder of an SAR transferred pursuant to this Section shall be bound by the same terms and conditions that governed the SAR during the period that it was held by the Participant; provided, however, that such transferee may not transfer the SAR except by will or the laws of descent and distribution. In the event of any transfer of a Corresponding SAR (by the Participant or his transferee), the Corresponding SAR and the related Option must be transferred to the same person or person or entity or entities.

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7.05. Exercise

Subject to the provisions of this Plan and the applicable Agreement, an SAR may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Committee shall determine; provided, however, that a Corresponding SAR that is related to an incentive stock option may be exercised only to the extent that the related Option is exercisable and only when the Fair Market Value exceeds the option price of the related Option. An SAR granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the SAR could be exercised. A partial exercise of an SAR shall not affect the right to exercise the SAR from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the SAR. The exercise of a Corresponding SAR shall result in the termination of the related Option to the extent of the number of shares with respect to which the SAR is exercised.

7.06. Employee Status

If the terms of any SAR provide that it may be exercised only during employment or continued service or within a specified period of time after termination of employment or continued service, the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment or service.

7.07. Settlement

At the Committee’s discretion, the amount payable as a result of the exercise of an SAR may be settled in cash, Common Stock, or a combination of cash and Common Stock. No fractional share will be deliverable upon the exercise of an SAR but a cash payment will be made in lieu thereof.

7.08. Stockholder Rights

No Participant shall, as a result of receiving an SAR, have any rights as a stockholder of the Company or any Affiliate until the date that the SAR is exercised and then only to the extent that the SAR is settled by the issuance of shares of Common Stock.

7.09. No Reduction of Initial Value

Except as provided in Article XII, the Initial Value of an outstanding SAR may not be reduced (by amendment, cancellation and new grant or otherwise) without the approval of stockholders. In addition, no payment shall be made in cancellation of a SAR without the approval of stockholders if, on the date of cancellation, the Initial Value exceeds Fair Market Value.

ARTICLE VIIISTOCK AWARDS

8.01. Award

In accordance with the provisions of Article IV, the Committee will designate each individual to whom a Stock Award is to be made and will, subject to Section 5.03, specify the number of shares of Common Stock covered by such awards.

8.02. Vesting

The Committee, on the date of the award, may prescribe that a Participant’s rights in a Stock Award shall be forfeitable or otherwise restricted for a period of time or subject to such conditions as may be set forth in the Agreement. By way of example and not of limitation, the Committee may prescribe that a Participant’s rights in a Stock Award shall be forfeitable or otherwise restricted subject to the attainment of objectives stated with reference to the Company’s,

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an Affiliate’s or a business unit’s attainment of objectives stated with respect to performance criteria established by the Committee, including the attainment of objectives stated with respect to one or more Performance Goals.

8.03. Employee Status

In the event that the terms of any Stock Award provide that shares may become transferable and nonforfeitable thereunder only after completion of a specified period of employment or continuous service, the Committee may decide in each case to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or service.

8.04. Stockholder Rights

Unless otherwise specified in accordance with the applicable Agreement, while the shares of Common Stock granted pursuant to the Stock Award may be forfeited or are nontransferable, a Participant will have all rights of a stockholder with respect to a Stock Award, including the right to receive dividends and vote the shares; provided, however, that dividends payable on shares of Common Stock subject to a Stock Award that does not become nonforfeitable and transferable solely on account of continued employment or service, such dividends shall be distributed only when, and to the extent that, the underlying Stock Award is nonforfeitable and transferable and the Committee may provide that such dividends shall be deemed to have been reinvested in additional shares of Common Stock. During the period that the shares of Common Stock granted pursuant to the Stock Award may be forfeited or are nontransferable (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares granted pursuant to a Stock Award, (ii) the Company shall retain custody of any certificates evidencing shares granted pursuant to a Stock Award, and (iii) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to each Stock Award. The limitations set forth in the preceding sentence shall not apply after the shares granted under the Stock Award are transferable and are no longer forfeitable.

ARTICLE IXPERFORMANCE UNIT AWARDS

9.01. Award

In accordance with the provisions of Article IV, the Committee will designate each individual to whom an award of Performance Units is to be made and will, subject to Section 5.03, specify the number of shares of Common Stock or other securities or property covered by such awards or the formula by which the number of shares of Common Stock or other securities or property covered by such awards will be determined. The Committee also will specify whether Dividend Equivalent Rights are granted in conjunction with the Performance Units.

9.02. Earning the Award

The Committee, on the date of the grant of an award, may prescribe that a Participant’s rights in the Performance Units shall be forfeitable or otherwise restricted for a period of time or subject to such conditions as may be set forth in the Agreement. By way of example and not of limitation, the Committee may prescribe that the Performance Units will be earned, and the Participant will be entitled to receive payment pursuant to the award of Performance Units, only upon the satisfaction of performance objectives and such other criteria as may be prescribed by the Committee, including the attainment of objectives stated with respect to one or more Performance Goals.

9.03. Payment

In the discretion of the Committee, the amount payable when an award of Performance Units is earned may be settled in cash, by the issuance of Common Stock, by the delivery of other securities or property or a combination thereof. A fractional share of Common Stock shall not be deliverable when an award of Performance Units is earned, but a cash payment will be made in lieu thereof. The amount payable when an award of Performance Units is earned shall be paid in a lump sum.

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9.04. Stockholder Rights

A Participant, as a result of receiving an award of Performance Units, shall not have any rights as a stockholder until, and then only to the extent that, the award of Performance Units is earned and settled in shares of Common Stock. After an award of Performance Units is earned and settled in shares of Common Stock, a Participant will have all the rights of a stockholder as described in Section 8.04.

9.05. Nontransferability

Except as provided in Section 9.06, Performance Units granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. No right or interest of a Participant in any Performance Units shall be liable for, or subject to, any lien, obligation, or liability of such Participant.

9.06. Transferable Performance Units

Section 9.05 to the contrary notwithstanding, if the Agreement provides, an award of Performance Units may be transferred by a Participant to the Participant’s children, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners, on such terms and conditions as may be permitted under Rule 16b-3 under the Exchange Act as in effect from time to time. The holder of Performance Units transferred pursuant to this Section shall be bound by the same terms and conditions that governed the Performance Units during the period that they were held by the Participant; provided, however that such transferee may not transfer Performance Units except by will or the laws of descent and distribution.

9.07. Employee Status

In the event that the terms of any Performance Unit award provide that no payment will be made unless the Participant completes a stated period of employment or continued service, the Committee may decide to what extent leaves of absence for government or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or service.

ARTICLE XOTHER EQUITY–BASED AWARDS

10.01. Award

In accordance with the provisions of Article IV, the Committee will designate each individual to whom an Other Equity-Based Award is to be made and will, subject to Section 5.03, specify the number of shares of Common Stock or other equity interests covered by such awards. The Committee also will specify whether Dividend Equivalent Rights are granted in conjunction with the Other Equity-Based Award.

10.02. Terms and Conditions

The Committee, at the time an Other Equity-Based Award is made, shall specify the terms and conditions which govern the award. The terms and conditions of an Other Equity-Based Award may prescribe that a Participant’s rights in the Other Equity-Based Award shall be forfeitable, nontransferable or otherwise restricted for a period of time or subject to such other conditions as may be determined by the Committee, in its discretion and set forth in the Agreement, including the attainment of objectives stated with respect to one or more Performance Goals. Other Equity-Based Awards may be granted to Participants, either alone or in addition to other awards granted under the Plan, and Other Equity-Based Awards may be granted in the settlement of other Awards granted under the Plan.

10.03. Payment or Settlement

Other Equity-Based Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, shall be payable or settled in shares of Common Stock, cash or a combination of Common Stock and cash, as determined

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by the Committee in its discretion. Other Equity-Based Awards denominated as equity interests other than Common Stock may be paid or settled in shares or units of such equity interests or cash or a combination of both as determined by the Committee in its discretion.

10.04. Employee Status

If the terms of any Other Equity-Based Award provides that it may be earned or exercised only during employment or continued service or within a specified period of time after termination of employment or continued service, the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment or service.

10.05. Stockholder Rights

A Participant, as a result of receiving an Other Equity-Based Award, shall not have any rights as a stockholder until, and then only to the extent that, the Other Equity-Based Award is earned and settled in Common Shares.

ARTICLE XIINCENTIVE AWARDS

11.01. Award

In accordance with the provisions of Article IV, the Committee will designate each individual to whom an Incentive Award is to be made. The amount payable under all Incentive Awards shall be finally determined by the Committee; provided, however, that the maximum amount payable to an individual under all Incentive Awards granted in the same calendar year is $10,000,000.

11.02. Terms and Conditions

The Committee, at the time an Incentive Award is made, shall specify the terms and conditions that govern the award. Such terms and conditions may prescribe that the Incentive Award shall be earned only to the extent that the Participant, the Company or an Affiliate, during a performance period of at least one year, achieves objectives stated with reference to one or more performance measures or criteria prescribed by the Committee, including the attainment of objectives stated with respect to one or more Performance Goals. Such terms and conditions also may include other limitations on the payment of Incentive Awards including, by way of example and not of limitation, requirements that the Participant complete a specified period of employment or service with the Company or an Affiliate or that the Company, an Affiliate, or the Participant attain stated objectives or goals (in addition to those prescribed in accordance with the preceding sentence) as a prerequisite to payment under an Incentive Award.

11.03. Nontransferability

Incentive Awards granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. No right or interest of a Participant in an Incentive Award shall be liable for, or subject to, any lien, obligation, or liability of such Participant.

11.04. Employee Status

If the terms of an Incentive Award provide that a payment will be made thereunder only if the Participant completes a stated period of employment or continued service the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment or service.

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11.05. Settlement

An Incentive Award that is earned shall be settled with a single lump sum payment which may be in cash, shares of Common Stock or a combination of cash and Common Stock, as determined by the Committee.

11.06. Stockholder Rights

No participant shall, as a result of receiving an Incentive Award, have any rights as a stockholder of the Company or an Affiliate until the date that the Incentive Award is settled and then only to the extent that the Incentive Award is settled by the issuance of shares of Common Stock.

ARTICLE XIIADJUSTMENT UPON CHANGE IN COMMON STOCK

The maximum number of shares of Common Stock as to which Options, SARs, Performance Units, Stock Awards and Other Equity-Based Awards may be granted, the individual grant limit in Section 5.03 and the terms of outstanding Stock Awards, Options, SARs, Incentive Awards, Performance Units and Other Equity-Based Awards shall be adjusted as determined by the Board in the event that (i) the Company (a) effects one or more nonreciprocal transactions between the Company and its stockholders such as a share dividend, extra-ordinary cash dividend, share split-up, subdivision or consolidation of shares that affects the number of shares or kind of Common Stock (or other securities of the Company) or the Fair Market Value (or the value of other Company securities) and causes a change in the Fair Market Value of the Common Stock subject to outstanding awards or (b) engages in a transaction to which Section 424 of the Code applies or (ii) there occurs any other event which, in the judgment of the Board necessitates such action. Any determination made under this Article XII by the Board shall be final and conclusive.

The issuance by the Company of shares of any class, or securities convertible into shares of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the maximum number of shares as to which Options, SARs, Performance Units, Stock Awards and Other Equity-Based Awards may be granted, the individual grant limit in Section 5.03 or the terms of outstanding Stock Awards, Options, SARs, Incentive Awards, Performance Units or Other Equity-Based Awards.

The Committee may make Stock Awards and may grant Options, SARs, Performance Units or Other Equity-Based Awards in substitution for performance shares, phantom shares, stock awards, stock options, stock appreciation rights, or similar awards held by an individual who becomes an employee of the Company or an Affiliate in connection with a transaction described in the first paragraph of this Article XII. Notwithstanding any provision of the Plan (other than the limitation of Section 5.02), the terms of such substituted Stock Awards, SARs, Other Equity-Based Awards, Options or Performance Units shall be as the Committee, in its discretion, determines is appropriate.

ARTICLE XIIICOMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES

No Option or SAR shall be exercisable, no shares of Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Company is a party, and the rules of all domestic stock exchanges on which the Company’s shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any certificate issued to evidence shares of Common Stock when a Stock Award is granted, a Performance Unit, Incentive Award or Other Equity-Based Award is settled or for which an Option or SAR is exercised may bear such legends and statements as the Committee may deem advisable to assure compliance with federal and state laws and regulations. No Option or SAR shall be exercisable, no Stock Award or Performance Unit shall be granted, no Common Shares shall be issued, no certificate for Common Stock shall be delivered, and no payment shall be made under this

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Plan until the Company has obtained such consent or approval as the Committee may deem advisable from regulatory bodies having jurisdiction over such matters.

ARTICLE XIVGENERAL PROVISIONS

14.01. Effect on Employment and Service

Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof), shall confer upon any individual or entity any right to continue in the employ or service of the Company or an Affiliate or in any way affect any right and power of the Company or an Affiliate to terminate the employment or service of any individual or entity at any time with or without assigning a reason therefor.

14.02. Unfunded Plan

This Plan, insofar as it provides for grants, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by grants under this Plan. Any liability of the Company to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company.

14.03. Rules of Construction

Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law.

All awards made under this Plan are intended to comply with, or otherwise be exempt from, Section 409A of the Code (“Section 409A”), after giving effect to the exemptions in Treasury Regulation sections 1.409A-1(b)(3) through (b)(12). This Plan and all Agreements shall be administered, interpreted and construed in a manner consistent with Section 409A. If any provision of this Plan or any Agreement is found not to comply with, or otherwise not be exempt from, the provisions of Section 409A, it shall be modified and given effect, in the sole discretion of the Committee and without requiring the Participant’s consent, in such manner as the Committee determines to be necessary or appropriate to comply with, or effectuate an exemption from, Section 409A. Each payment under an award granted under this Plan shall be treated as a separate identified payment for purposes of Section 409A.

If a payment obligation under an award or an Agreement arises on account of the Participant’s termination of employment and such payment obligation constitutes “deferred compensation” (as defined under Treasury Regulation section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation sections 1.409A-1(b)(3) through (b)(12)), it shall be payable only after the Participant’s “separation from service” (as defined under Treasury Regulation section 1.409A-1(h)); provided, however, that if the Participant is a “specified employee” (as defined under Treasury Regulation section 1.409A-1(i)), any such payment that is scheduled to be paid within six months after such separation from service shall accrue without interest and shall be paid on the first day of the seventh month beginning after the date of the Participant’s separation from service or, if earlier, within fifteen days after the appointment of the personal representative or executor of the Participant’s estate following the Participant’s death.

14.04. Withholding Taxes

Each Participant shall be responsible for satisfying any income and employment tax withholding obligations attributable to participation in the Plan. Unless otherwise provided by the Agreement, any such withholding tax obligations may be satisfied in cash (including from any cash payable in settlement of an award of Performance Units, SARs, Incentive Awards or Other Equity-Based Award) or a cash equivalent acceptable to the Committee. Any minimum statutory federal, state, district or city withholding tax obligations also may be satisfied (a) by surrendering to the Company shares of Common Stock previously acquired by the Participant; (b) by authorizing the Company to withhold

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or reduce the number of shares of Common Stock otherwise issuable to the Participant upon the exercise of an Option or SAR, the settlement of a Performance Unit award, Incentive Award or an Other Equity-Based Award (if applicable) or the grant or vesting of a Stock Award; or (c) by any other method as may be approved by the Committee. If shares of Common Stock are used to pay all or part of such withholding tax obligation, the Fair Market Value of the shares surrendered, withheld or reduced shall be determined as of the day the tax liability arises.

14.05. Return of Awards; Repayment

Each Stock Award, Option, SAR, Performance Unit award, Incentive Award and Other Equity-Based Award granted under the Plan, as amended and restated herein, is subject to the condition that the Company may require that such award be returned and that any payment made with respect to such award must be repaid if such action is required under the terms of any Company “clawback” policy as in effect on the date that the payment was made, on the date the award was granted or, as applicable, the date the Option or SAR was exercised or the date the Stock Award, Performance Unit award or Other Equity-Based Award is vested or earned.

14.06. REIT Status

The Plan shall be interpreted and construed in a manner consistent with the Company’s status as a REIT. No award shall be granted or awarded, and with respect to any award granted under the Plan, such award shall not vest, be exercisable or be settled (i) to the extent that the grant, vesting, exercise or settlement could cause the Participant or any other person to be in violation of the common stock ownership limit or aggregate stock ownership limit prescribed by the Company’s Articles of Incorporation or Charter, as amended from time to time or (ii) if, in the discretion of the Committee, the grant, vesting, exercise or settlement of the award could impair the Company’s status as a REIT.

ARTICLE XVCHANGE IN CONTROL

15.01. Impact of Change in Control

Upon a Change in Control, the Committee is authorized to cause (i) outstanding Options and SARs to become exercisable with respect to some or all of the shares of Common Stock covered by the awards, (ii) outstanding Stock Awards to become transferable and nonforfeitable with respect to some or all of the shares of Common Stock covered by the awards and (iii) outstanding Performance Units, Incentive Awards and Other Equity-Based Awards to become earned and nonforfeitable in whole or in part.

15.02. Assumption Upon Change in Control

In the event of a Change in Control, the Committee, in its discretion and without the need for a Participant’s consent, may provide that an outstanding Option, SAR, Incentive Award, Stock Award, Performance Unit or Other Equity-Based Award shall be assumed by, or a substitute award granted by, the surviving entity in the Change in Control. Such assumed or substituted award shall be of the same type of award as the original Option, SAR, Incentive Award, Stock Award, Performance Unit or Other Equity-Based Award being assumed or substituted. The assumed or substituted award shall have an intrinsic value, as of the Control Change Date, that is substantially equal to the intrinsic value of the original award (or the difference between the Fair Market Value and the option price or Initial Value in the case of Options and SARs) as the Committee determines is equitably required and such other terms and conditions as may be prescribed by the Committee.

15.03. Cash-Out Upon Change in Control

In the event of a Change in Control, the Committee, in its discretion and without the need of a Participant’s consent, may provide that each Option, SAR, Incentive Award, Stock Award and Performance Unit and Other Equity-Based Award shall be cancelled, in whole or in part, in exchange for a payment. The payment may be in cash, shares of Common Stock or other securities or consideration received by stockholders in the Change in Control transaction. The amount of the cancellation payment shall be an amount that is substantially equal to (i) the amount by which the

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price per share received by stockholders in the Change in Control exceeds the option price or Initial Value in the case of an Option and SAR, or (ii) the price per share received by stockholders for each share of Common Stock subject to a Stock Award, Performance Unit or Other Equity-Based Award, (iii) the value of the other securities or property in which the Performance Unit or Other Equity-Based award is denominated or (iv) the amount payable under an Incentive Award on account of meeting all Performance Goals or other performance objectives. If the option price or Initial Value exceeds the price per share received by stockholders in the Change in Control transaction, the Option or SAR may be cancelled under this Section 15.03 without any payment to the Participant.

15.04. Limitation of Benefits

The benefits that a Participant may be entitled to receive under this Plan and other benefits that a Participant is entitled to receive under other plans, agreements and arrangements (which, together with the benefits provided under this Plan, are referred to as “Payments”), may constitute Parachute Payments that are subject to Code Sections 280G and 4999. As provided in this Section 15.04, the Parachute Payments will be reduced if, and only to the extent that, a reduction will allow a Participant to receive a greater Net After Tax Amount than a Participant would receive absent a reduction.

The Accounting Firm will first determine the amount of any Parachute Payments that are payable to a Participant. The Accounting Firm also will determine the Net After Tax Amount attributable to the Participant’s total Parachute Payments.

The Accounting Firm will next determine the largest amount of Payments that may be made to the Participant without subjecting the Participant to tax under Code Section 4999 (the “Capped Payments”). Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to the Capped Payments.

The Participant will receive the total Parachute Payments or the Capped Payments, whichever provides the Participant with the higher Net After Tax Amount. If the Participant will receive the Capped Payments, the total Parachute Payments will be adjusted by first reducing the amount of any noncash benefits under this Plan or any other plan, agreement or arrangement (with the source of the reduction to be directed by the Participant) and then by reducing the amount of any cash benefits under this Plan or any other plan, agreement or arrangement (with the source of the reduction to be directed by the Participant). The Accounting Firm will notify the Participant and the Company if it determines that the Parachute Payments must be reduced to the Capped Payments and will send the Participant and the Company a copy of its detailed calculations supporting that determination.

As a result of the uncertainty in the application of Code Sections 280G and 4999 at the time that the Accounting Firm makes its determinations under this Section 15.04, it is possible that amounts will have been paid or distributed to the Participant that should not have been paid or distributed under this Section 15.04 (“Overpayments”), or that additional amounts should be paid or distributed to the Participant under this Section 15.04 (“Underpayments”). If the Accounting Firm determines, based on either the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant, which assertion the Accounting Firm believes has a high probability of success or controlling precedent or substantial authority, that an Overpayment has been made, the Participant must repay to the Company, without interest; provided, however, that no loan will be deemed to have been made and no amount will be payable by the Participant to the Company unless, and then only to the extent that, the deemed loan and payment would either reduce the amount on which the Participant is subject to tax under Code Section 4999 or generate a refund of tax imposed under Code Section 4999. If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the Accounting Firm will notify the Participant and the Company of that determination and the amount of that Underpayment will be paid to the Participant promptly by the Company.

For purposes of this Section 15.04, the term “Accounting Firm” means the independent accounting firm engaged by the Company immediately before the Control Change Date. For purposes of this Section 15.04, the term “Net After Tax Amount” means the amount of any Parachute Payments or Capped Payments, as applicable, net of taxes imposed under Code Sections 1, 3101(b) and 4999 and any State or local income taxes applicable to the Participant on the date of payment. The determination of the Net After Tax Amount shall be made using the highest combined effective rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Payments,

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as applicable, in effect on the date of payment. For purposes of this Section 15.04, the term “Parachute Payment” means a payment that is described in Code Section 280G(b)(2), determined in accordance with Code Section 280G and the regulations promulgated or proposed thereunder.

ARTICLE XVIAMENDMENT

The Board may amend or terminate this Plan at any time; provided, however, that no amendment may adversely impair the rights of a Participant with respect to outstanding awards without the Participant’s consent. In addition, an amendment will be contingent on approval of the Company’s stockholders if such approval is required by law or the rules of any exchange on which the Common Stock is listed or if the amendment would materially increase the benefits accruing to Participants under the Plan, materially increase the aggregate number of shares of Common Stock that may be issued under the Plan or materially modify the requirements as to eligibility for participation in the Plan.

ARTICLE XVIIDURATION OF PLAN

No Stock Award, Performance Unit Award, Incentive Award, Option, SAR or Other Equity-Based Award may be granted under this Plan after May 10, 2023. Stock Awards, Performance Unit awards, Incentive Awards, Options, SARs and Other Equity-Based Awards granted before such date shall remain valid in accordance with their terms.

ARTICLE XVIIIEFFECTIVE DATE OF PLAN

Options, Stock Awards, Performance Units, Incentive Awards and Other Equity-Based Awards may be granted under this Plan, as amended and restated herein, on and after the date that the Plan, as amended and restated herein, is adopted by the Board, provided that, this Plan, as amended and restated herein, shall not be effective unless the votes cast in favor of the approval of the amended and restated Plan by the stockholders of the Company exceed the votes cast opposing such proposal at a duly constituted meeting of the stockholders of the Company; provided that the total votes cast on the proposal with respect to the Plan represents more than 50% in interest of all shares entitled to vote on such proposal.

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EX-10.2

Exhibit 10.2

STOCK AWARD AGREEMENT

(Independent Director)

THIS STOCK AWARD AGREEMENT (the “Agreement”) is made effective as of the ____ day of ________, 2013 (the “Date of Grant”), between CYS Investments, Inc., a Maryland corporation (the “Company”), and ___________ (the “Participant”).

RECITALS:

WHEREAS, the Company has adopted the CYS Investments, Inc. 2013 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement; capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the Stock Award provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOWTHEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

1.Grant of the Stock Award. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant a stock award (the “Stock Award”) consisting of ______ restricted shares of the Company’s common stock, $.01 par value per share (the “Restricted Shares”). The Restricted Shares shall vest and become nonforfeitable in accordance with Section 2 hereof.

2.Vesting.

(a)Subject to the Participant’s continued service with the Company, the Restricted Shares shall vest and become nonforfeitable with respect to one-hundred percent (100%) of the Restricted Shares initially granted hereunder on the day immediately preceding the first anniversary of the Date of Grant.

(b)If the Participant’s service with the Company terminates or is terminated for any reason, the Restricted Shares shall, to the extent not then vested, be forfeited by the Participant without consideration.

(c)Notwithstanding any other provision of this Agreement to the contrary, in the event a Change in Control occurs before the first anniversary of the Date of Grant, and if the Participant provides continuous services to the Company from the Date of Grant through and until the Control Change Date, the Restricted Shares shall become fully vested.

(d)For purposes of this Agreement, “service” means service provided by the Participant to the Company as a member of the Company’s Board.

3.Certificates. Certificates evidencing the Restricted Shares shall be issued by the Company and shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to

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the vesting of such Restricted Shares pursuant to Section 2. As a condition to the receipt of this Restricted Stock Award, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares. No certificates shall be issued for fractional Shares.

4.Rights as a Stockholder. The Participant shall be the record owner of the Restricted Shares until or unless such Restricted Shares are forfeited pursuant to Section 2 hereof, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights with respect to the Restricted Shares and the Participant shall receive, when paid, any dividends on all of the Restricted Shares granted hereunder as to which the Participant is the record holder on the applicable record date; provided that the Restricted Shares shall be subject to the limitations on transfer and encumbrance set forth in Section 7. As soon as practicable following the vesting of any Restricted Shares pursuant to Section 2, certificates for the Restricted Shares which shall have vested shall be delivered to the Participant or to the Participant along with the stock powers relating thereto.

5.Legend on Certificates. The certificates representing the vested Restricted Shares delivered to the Participant shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6.No Right to Continued Service. The granting of the Restricted Shares evidenced by this Agreement shall impose no obligation on the Company or any Affiliate to continue the service of the Participant and shall not lessen or affect the Company’s or any Affiliate’s right to terminate the service of such Participant.

7.Transferability. The Restricted Shares may not, at any time prior to becoming vested pursuant to Section 2, be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.

8.Securities Laws. Upon the vesting of any Restricted Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

9.Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the corporate records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

10.Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS.

11.Stock Award Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Stock Award and the Restricted Shares granted hereunder are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between

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any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

12.Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

CYS INVESTMENTS, INC.

By:    _____________________________________

                        Kevin E. Grant, Chief Executive Officer

Agreed and Acknowledged as of the date first above written:

_________________________________

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EX-10.3

Exhibit 10.3

STOCK AWARD AGREEMENT

THIS STOCK AWARD AGREEMENT (the “Agreement”) is made effective as of the ___ day of _____ 201_ (the “Date of Grant”), between CYS Investments, Inc., a Maryland corporation (the “Company”), and _________ (the “Participant”).

RECITALS:

WHEREAS, the Company has adopted the CYS Investments, Inc. 2013 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

WHEREAS, the Committee has entered into that certain Employment Agreement by and between the Company and the Participant, dated September 1, 2011 (the “Employment Agreement”); and

WHEREAS, the Committee has elected to grant the Stock Award provided for herein to the Participant, an employee of the Company, pursuant to the Company’s Incentive Compensation Plan for the year ended December 31, ____.

NOWTHEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

1.Grant of the Stock Award. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant a Stock Award (the “Stock Award”) consisting of ____ restricted shares of Common Stock (the “Restricted Shares”). The Restricted Shares shall vest and become nonforfeitable in accordance with Section 2 hereof.

2.Vesting.

(a)Subject to the Participant’s continued employment with the Company or an Affiliate until the applicable anniversary of the Date of Grant, the Restricted Shares shall vest and become nonforfeitable with respect to ____ Restricted Shares on each of the ____ anniversaries of the Date of Grant and with respect to ____ Restricted Shares on the ____ anniversary of the Date of Grant.

(b)Any Restricted Shares that are not vested on or before the cessation of the Participant’s employment shall be forfeited by the Participant without consideration on the date on which the Participant ceases to be employed by the Company or an Affiliate on account of termination by the Company for Cause (as defined in the Employment Agreement) or voluntary resignation by the Participant without Good Reason (as defined in the Employment Agreement).

(c)Notwithstanding any other provision of this Agreement to the contrary, any Restricted Shares not previously forfeited or vested shall become vested (i) on the date of the Participant’s death, (ii) on the date that the Participant ceases to be employed by the Company or an Affiliate on account of termination by the Company without Cause, (iii) on the date the Participant ceases to be employed by the Company or an Affiliate on account of Disability (as defined in the Employment Agreement), (iv) on the date that the Participant ceases to be employed by the Company or an Affiliate on account of termination by the Participant for Good Reason, or (v) on a Control Change Date if the Participant remains in continuous employment from the Date of Grant until the date of the Participant’s death, termination without Cause, termination on account of Disability, resignation for Good Reason or a Control Change Date, as applicable.

(d)For purposes of this Agreement, “employment” means service provided by the Participant as an officer, director or employee of the Company or an Affiliate.

3.Certificates. Certificates evidencing the Restricted Shares shall be issued by the Company and shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to the vesting of such Restricted Shares pursuant to Section 2. As a condition to the receipt of this Restricted Stock Award, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares. No certificates shall be issued for fractional Shares.

4.Rights as a Stockholder. The Participant shall be the record owner of the Restricted Shares until or unless such Restricted Shares are forfeited pursuant to Section 2 hereof, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights with respect to the Restricted Shares and the Participant shall receive, when paid, any dividends or distributions on all of the Restricted Shares granted hereunder as to which the Participant is the record holder on the applicable record date. As soon as practicable following the vesting of any Restricted Shares pursuant to Section 2, certificates for the Restricted Shares which shall have vested shall be delivered to the Participant or to the Participant along with the stock powers relating thereto.

5.Legend on Certificates. The certificates representing the vested Restricted Shares delivered to the Participant shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6.No Right to Continued Service. The granting of the Stock Award evidenced by this Agreement shall impose no obligation on the Company or an Affiliate to continue the employment or service of the Participant and shall not lessen or affect the right of the Company or an Affiliate to terminate the employment or service of such Participant.

7.Transferability. The Restricted Shares may not, at any time prior to becoming vested pursuant to Section 2, be assigned, alienated, pledged, attached, sold or otherwise transferred or

2

encumbered by the Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.

8.Withholding. The Participant shall make arrangements satisfactory to the Company with respect to the satisfaction of applicable income and employment tax withholding requirements and the Company is hereby authorized to withhold from the Participant’s compensation any applicable withholding taxes in respect of the Restricted Shares, their grant or vesting or any payment or transfer with respect to the Restricted Shares and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. Without limiting the generality of the foregoing, to the extent permitted by the Committee, the Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of shares of Common Stock held by the Participant (which are not subject to any pledge or other security interest [and which have been vested and held by the Participant for no less than six months (or such other period as established from time to time by the Committee or United States generally accepted accounting principles)]) or by having the Company withhold from the number of Restricted Shares otherwise deliverable to the Participant hereunder Restricted Shares with a Fair Market Value not in excess of the statutory minimum withholding liability.

9.Securities Laws. Upon the vesting of any Restricted Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

10.Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the corporate records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11.Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS.

12.Stock Award Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Stock Award and the Restricted Shares granted hereunder are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

13.Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK –

SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

CYS INVESTMENTS, INC.

By:    _____________________________________

Kevin E. Grant, Chief Executive Officer

AGREED AND ACKNOWLEDGED:

_________________________________

4

EX-10.4

Exhibit 10.4

STOCK AWARD AGREEMENT

THIS STOCK AWARD AGREEMENT (the “Agreement”) is made effective as of the _____ day of _______ 201_ (the “Date of Grant”), by and between CYS Investments, Inc., a Maryland corporation (the “Company”), and _________________ (the “Participant”).

RECITALS:

WHEREAS, the Company has adopted the CYS Investments, Inc. 2013 Equity Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and

WHEREAS, the Committee has elected to grant the Stock Award provided for herein to the Participant, an employee of the Company, pursuant to the Company’s Incentive Compensation Plan for the year ended December 31, 201_.

NOWTHEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

1.Grant of the Stock Award. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant a Stock Award (the “Stock Award”) consisting of ____ restricted shares of Common Stock (the “Restricted Shares”). The Restricted Shares shall vest and become nonforfeitable in accordance with Section 2 hereof.

2.Vesting.

(a)Subject to the Participant’s continued employment with the Company or an Affiliate until the applicable anniversary of the Date of Grant, the Restricted Shares shall vest and become nonforfeitable with respect to ____ Restricted Shares on each of the ____ and ____ anniversaries of the Date of Grant and with respect to ____ Restricted Shares on the ____ anniversary of the Date of Grant.

(b)Notwithstanding any other provision of this Agreement to the contrary, any Restricted Shares not previously forfeited or vested shall become vested (i) on the date of the Participant’s death, (ii) on the date that the Participant ceases to be employed by the Company or an Affiliates on account of Disability (as defined below), or (iii) on a Control Change Date if the Participant remains in continuous employment from the Date of Grant until the date of the Participant’s death, termination on account of Disability or a Control Change Date, as applicable.

(c)Any Restricted Shares that are not vested on or before the cessation of the Participant’s employment shall be forfeited by the Participant without consideration on the date on which the Participant’s employment with the Company or an Affiliate terminates or is terminated.

(d)For purposes of this Agreement, “employment” means service provided by the Participant as an officer, director or employee of the Company or an Affiliate.

(e)For purposes of this Agreement, “Disability” means that the Participant is, as a result of injury or physical or mental illness, absent from the full-time performance of his or her duties to the Company for a period of 180 consecutive calendar days.

3.Certificates. Certificates evidencing the Restricted Shares shall be issued by the Company and shall be registered in the Participant’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to the vesting of such Restricted Shares pursuant to Section 2. As a condition to the receipt of this Restricted Stock Award, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares. No certificates shall be issued for fractional Shares.

4.Rights as a Stockholder. The Participant shall be the record owner of the Restricted Shares until or unless such Restricted Shares are forfeited pursuant to Section 2 hereof, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights with respect to the Restricted Shares and the Participant shall receive, when paid, any dividends or distributions on all of the Restricted Shares granted hereunder as to which the Participant is the record holder on the applicable record date; provided that the Restricted Shares shall be subject to the limitations on transfer and encumbrance set forth in Section 7. As soon as practicable following the vesting of any Restricted Shares pursuant to Section 2, certificates for the Restricted Shares which shall have vested shall be delivered to the Participant or to the Participant along with the stock powers relating thereto.

5.Legend on Certificates. The certificates representing the vested Restricted Shares delivered to the Participant shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

6.No Right to Continued Service. The granting of the Stock Award evidenced by this Agreement shall impose no obligation on the Company or an Affiliate to continue the employment or service of the Participant and shall not lessen or affect the right of the Company or an Affiliate to terminate the employment or service of such Participant.

7.Transferability. The Restricted Shares may not, at any time prior to becoming vested pursuant to Section 2, be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.

8.Withholding. The Participant shall make arrangements satisfactory to the Company with respect to the satisfaction of applicable income and employment tax withholding requirements and the Company is hereby authorized to withhold from the Participant’s compensation any

2

applicable withholding taxes in respect of the Restricted Shares, their grant or vesting or any payment or transfer with respect to the Restricted Shares and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. Without limiting the generality of the foregoing, to the extent permitted by the Committee, the Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of shares of Common Stock held by the Participant (which are not subject to any pledge or other security interest [and which have been vested and held by the Participant for no less than six months (or such other period as established from time to time by the Committee or United States generally accepted accounting principles)]) or by having the Company withhold from the number of Restricted Shares otherwise deliverable to the Participant hereunder Restricted Shares with a Fair Market Value not in excess of the statutory minimum withholding liability.

9.Securities Laws. Upon the vesting of any Restricted Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

10.Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the corporate records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11.Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS.

12.Stock Award Subject to Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Stock Award and the Restricted Shares granted hereunder are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

13.     Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

CYS INVESTMENTS, INC.

By:    _____________________________________

Kevin E. Grant, Chief Executive Officer

AGREED AND ACKNOWLEDGED:

_________________________________

4

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kevin E. Grant, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CYS Investments, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: July 19, 2013

/s/    KEVIN E. GRANT        

Kevin E. Grant

Chairman of the Board

and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Frances R. Spark, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CYS Investments, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: July 19, 2013

/s/    FRANCES R. SPARK        

Frances R. Spark

Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of CYS Investments, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin E. Grant, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 19, 2013

/s/    KEVIN E. GRANT        

Kevin E. Grant

Chairman of the Board

and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant To

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of CYS Investments, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frances R. Spark, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 19, 2013

/s/    FRANCES R. SPARK        

Frances R. Spark

Chief Financial Officer and Treasurer

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis Of Presentation

Basis of Presentation

The accompanying interim unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2012, included in the annual report on Form 10-K. The results for interim periods are not necessarily indicative of the results to be expected for the fiscal year.

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Clarification of the Scope of Audit and Accounting Guide Investment Companies (“ASC 946”), prior to its deferral in February 2008. Under ASC 946, the Company uses financial reporting for investment companies.

Segment Reporting

Segment Reporting

The Company operates as a single segment reporting to the Chief Executive Officer, who manages the entire investment portfolio.

Use Of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those management estimates.

Cash And Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash held in banks and highly liquid investments with original maturities of three months or less. Interest income earned on cash and cash equivalents is recorded in other income.

Interest Rate Swap And Cap Contracts

Interest Rate Swap and Cap Contracts

The Company utilizes interest rate swaps and caps to hedge the interest rate risk associated with the financing of its portfolio. Specifically, the Company seeks to hedge the exposure to potential interest rate mismatches between the interest earned on investments and the borrowing costs caused by fluctuations in short term interest rates. In a simple interest rate swap, one investor pays a floating rate of interest on a notional principal amount and receives a fixed rate of interest on the same notional principal amount for a specified period of time. Alternatively, an investor may pay a fixed rate and receive a floating rate. In a simple interest rate cap, one investor pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). If the floating interest rate (the “floating rate”) exceeds the cap rate, the investor receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. Alternatively, an investor may receive a premium and pay the difference in cap rate and floating rate.

During the term of the interest rate swap or cap, the Company makes or receives periodic payments and unrealized gains or losses are recorded as a result of marking the swap and cap to their fair value. When the swap or cap is terminated, the Company records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company’s cost basis in the contract, if any. The periodic payments, amortization of premiums on cap contracts and any realized or unrealized gains or losses are reported under gains and losses from swap and cap contracts in the statements of operations. Swaps involve a risk that interest rates will move contrary to the Company’s expectations, thereby increasing the Company’s payment obligation.

Because the Company uses financial reporting for investment companies, its investments, including its interest rate swap and cap contracts, are carried at fair value with changes in fair value included in earnings. Consequently, there would be no impact to designating interest rate swaps and caps as cash flow or fair value hedges under GAAP.

The Company's interest rate swap and cap contracts are subject to master netting arrangements. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the swap or cap limited to the fair value of collateral posted in excess of the fair value of the contract. As of June 30, 2013 and December 31, 2012, the Company did not anticipate nonperformance by any counterparty. Should interest rates move unexpectedly, the Company may not achieve the anticipated benefits of the interest rate swap or cap and may realize a loss.

Investment Valuation

Investment Valuation

The Company has established a pricing committee responsible for establishing valuation policies and procedures as well as approving valuations on a monthly basis at a pricing meeting. The pricing committee is made up of individuals from the accounting team, the investment team and senior management.

Agency RMBS, Agency Debentures and U.S. Treasury securities are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security.

Interest rate swaps and caps are generally valued using valuations provided by broker quotations. Such broker quotations are based on the present value of fixed and projected floating rate cash flows over the term of the swap contract. Future cash flows are discounted to their present value using swap rates provided by electronic data services or by broker.

Fair values of long-lived assets, including real estate, are primarily derived internally and are based on observed sales transactions for similar assets. For real estate, fair values are based on discounted cash flow estimates which reflect current and projected lease profiles and available industry information about capitalization rates and expected trends in rents and occupancy.  

All valuations received from third party pricing services or broker quotes are non-binding. The Company does not adjust any of the prices received from third party pricing services or brokers, and all prices are reviewed by the Company. This review includes comparisons of similar market transactions, alternative third party pricing services and broker quotes, or comparisons to a pricing model. To ensure the proper fair value hierarchy, the Company reviews the third party pricing service’s methodology to understand whether observable or unobservable inputs are being used.

Agency RMBS

Agency RMBS

The Company’s investments in Agency RMBS consist of pass-through certificates backed by fixed rate, monthly reset adjustable-rate loans (“ARMs”) and hybrid ARMs, the principal and interest of which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Hybrid ARMs have interest rates that have an initial fixed period (typically three, five, seven or ten years) and thereafter reset at regular intervals in a manner similar to ARMs.

Forward Settling Transactions

Forward Settling Transactions

The Company engages in forward settling transactions to purchase certain securities. The Company records forward settling transactions on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment on the settlement date for the securities purchased. Securities purchased on a forward settling basis are carried at fair value and only begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract. Among other forward settling transactions, the Company from time to time transacts in to-be-announced securities (“TBAs”). As with other forward settling transactions, a seller agrees to issue TBAs at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Company agrees to accept any security that meets specified terms such as issuer, interest rate and terms of underlying mortgages. The Company records TBAs on the trade date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are carried at fair value and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages received may be less favorable than those anticipated by the Company.

As of June 30, 2013 and December 31, 2012, the Company had pledged Agency RMBS with a fair value of $116.4 million and $10.4 million, respectively, on its open forward settling transactions.

Repurchase Agreements

Repurchase Agreements

Repurchase agreements are borrowings that are collateralized by the Company’s Agency RMBS and are carried at their amortized cost, which approximates their fair value due to their short term nature, generally 30-90 days. The Company’s repurchase agreement counterparties are large institutional dealers in fixed income securities. Collateral is valued daily and counterparties may require additional collateral when appropriate. Counterparties have the right to sell or repledge collateral pledged for repurchase agreements.

Investment Transactions And Income

Investment Transactions and Income

The Company records its transactions in securities on a trade date basis. Realized gains and losses on securities transactions are recorded on an identified cost basis. Interest income and expense are recorded on the accrual basis. Interest income on Agency RMBS and Agency Debentures is accrued based on outstanding principal amount of the securities and their contractual terms. Interest on collateralized loan obligations ("CLOs") is accrued at a rate determined based on estimated future cash flows and adjusted prospectively as future cash flow amounts are recast. For CLOs placed on nonaccrual status or when the Company cannot reliably estimate cash flows, the cost recovery method is used. Amortization of premium and accretion of discount are recorded using the yield to maturity method, and are included in investment income in the statements of operations. The Company does not estimate prepayments when calculating the yield to maturity. The amount of premium or discount associated with a prepayment is recorded through investment income on the statements of operations as they occur.

Compensation And Benefits

Compensation and Benefits

Included in the Company’s compensation and benefits are salaries, incentive compensation, benefits, share based compensation and the expense relating to restricted stock granted to non-employees (prior to the internalization of the Company's management, which became effective on September 1, 2011). The Company accounts for share based compensation using the fair value based methodology prescribed by ASC 718, Share-Based Payment (“ASC 718”). Compensation cost related to restricted common stock issued is measured at its estimated fair value at the grant date and recognized as expense over the vesting period.

Income Taxes

Income Taxes

The Company has elected to be taxed as a REIT and intends to continue to comply with provisions of the Code with respect thereto. As a REIT, the Company generally will not be subject to federal or state income tax on income that it currently distributes to its stockholders. To maintain its qualification as a REIT, the Company must distribute at least 90% of its REIT taxable income to its stockholders and meet certain other tests relating to assets and income.

Earnings Per Share ("EPS")

Earnings Per Share (“EPS”)

Basic EPS is computed using the two class method by dividing net income (loss), after adjusting for the impact of unvested stock awards deemed to be participating securities, by the weighted average number of common shares outstanding calculated excluding unvested stock awards. Diluted EPS is computed by dividing net income (loss), after adjusting for the impact of unvested stock awards deemed to be participating securities, by the weighted average number of common shares outstanding calculated excluding unvested stock awards, giving effect to common stock options and warrants, if they are not anti-dilutive. See Note 3 for EPS computations.

Description of New Accounting Pronouncements Not yet Adopted

Recent Accounting Pronouncements

In June 2013, the FASB issued ASU 2013-08, Financial Services-Investment Companies (Topic 946). This update modifies the guidance for Topic 946 for determining whether an entity is an investment company for GAAP purposes. It requires entities that adopted Statement of Position 07-1 prior to its deferral to reassess whether they continue to meet the definition of an investment company for GAAP purposes. The guidance is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with retrospective application. Earlier application is prohibited. Management has performed its reassessment and has determined that the Company does not meet the definition of an investment company in accordance with ASC 946 and as a result will need to select and apply other appropriate accounting principles which will change the presentation of the Company's financial statements effective January 1, 2014. Management is still assessing the impact on the Company's financial statements and currently does not expect there will be a material effect on the Company's financial position or results of operations.

In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues about ASU 2011-11 and applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The guidance was effective January 1, 2013 and was applied retrospectively. This guidance does not amend the circumstances in which the Company offsets its derivative positions. As a result, the guidance does not have a material effect on the Company's financial statements.

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Condensed Schedules Of Investments (USD $)	Jun. 30, 2013		Dec. 31, 2012
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	$ 17,218,204,000		$ 20,861,718,000	[1]
Derivative, Notional Amount	2,100,000,000
Fixed Income Securities [Member]
Investment Holdings [Line Items]
Percent of Investments in Securities	845.40%	[2]	868.30%	[2]
Cost	17,538,463
Mortgage Pass Through Agency Residential Mortgage Backed Securities [Member]
Investment Holdings [Line Items]
Percent of Investments in Securities			865.90%	[2]
Cost			20,560,760
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	16,804,844,000		19,681,502,000
Financial Instruments, Owned, at Fair Value	17,211,259,000		20,804,143,000
Percent of Investments in Securities	845.10%	[2]
Cost	17,531,518
US Treasury Bill [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			38,000,000
Financial Instruments, Owned, at Fair Value			37,999,000
Percent of Investments in Securities			1.60%	[2]
Cost			37,995
Other Investments [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	6,945,000		20,473,000	[2],[3]
Financial Instruments, Owned, at Fair Value	6,945,000		19,576,000	[2],[3]
Percent of Investments in Securities	0.30%	[2]	0.80%	[2],[3]
Cost	6,945	[3]	12,855	[2],[3]
Investments In Securities [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	16,811,789,000		19,739,975,000
Financial Instruments, Owned, at Fair Value	17,218,204,000		20,861,718,000
Cost			20,611,610
Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	288,455,000		122,989,000
Derivative, Notional Amount	4,400,000,000		3,400,000,000
Percent of Investments in Securities	14.20%	[2]	5.10%	[2]
Cost	181,083		134,815
Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	22,370,000		(97,395,000)
Derivative, Notional Amount	8,590,000,000		7,490,000,000
Percent of Investments in Securities	(1.10%)	[2],[4]	5.10%	[2],[4]
Cost	0.000
Derivative, Fixed Interest Rate			0.00%
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member]
Investment Holdings [Line Items]
Percent of Investments in Securities			38.00%	[2]
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	2,184,171,000		871,029,000
Financial Instruments, Owned, at Fair Value	2,219,464,000		913,223,000
Percent of Investments in Securities	109.00%	[2]
Fannie Mae Pools [Member] | Mortgage Pass Through Agency Residential Mortgage Backed Securities [Member]
Investment Holdings [Line Items]
Percent of Investments in Securities			822.80%	[2]
Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	14,520,072,000		18,695,972,000
Financial Instruments, Owned, at Fair Value	14,885,413,000		19,768,633,000
Percent of Investments in Securities	730.90%	[2]
Ginnie Mae Pools [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	100,601,000		114,501,000
Financial Instruments, Owned, at Fair Value	106,382,000		122,287,000
Percent of Investments in Securities	5.20%	[2]	5.10%	[2]
2.15%, due 10/1/2042 - 2/1/2043 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	136,770,000	[5],[6]
Financial Instruments, Owned, at Fair Value	137,321,000	[5],[6]
2.18%, due 11/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	32,020,000	[5],[6]	34,926,000	[7]
Financial Instruments, Owned, at Fair Value	32,173,000	[5],[6]	36,246,000	[7]
2.24%, due 10/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	48,609,000	[5],[6]	49,605,000	[7]
Financial Instruments, Owned, at Fair Value	49,214,000	[5],[6]	51,511,000	[7]
2.26%, due 11/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	42,091,000	[5],[6]	45,372,000	[7]
Financial Instruments, Owned, at Fair Value	42,664,000	[5],[6]	47,149,000	[7]
2.34%, due 11/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	70,341,000	[5],[6]
Financial Instruments, Owned, at Fair Value	71,090,000	[5],[6]
2.37%, due 1/1/2043 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	94,168,000	[5],[6]
Financial Instruments, Owned, at Fair Value	95,341,000	[5],[6]
2.39%, due 10/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	21,463,000	[5],[6]
Financial Instruments, Owned, at Fair Value	21,738,000	[5],[6]
2.40%, due 9/1/2042 (b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	35,425,000	[6]
Financial Instruments, Owned, at Fair Value	35,912,000	[6]
2.41%, due 11/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	69,528,000	[5],[6]
Financial Instruments, Owned, at Fair Value	70,526,000	[5],[6]
2.42%, due 9/1/2042 - 1/1/2043 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	45,600,000	[5],[6]
Financial Instruments, Owned, at Fair Value	46,255,000	[5],[6]
2.43%, due 7/1/2042 - 10/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	260,162,000	[5],[6]
Financial Instruments, Owned, at Fair Value	264,174,000	[5],[6]
2.44%, due 6/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	50,724,000	[5],[6]
Financial Instruments, Owned, at Fair Value	51,536,000	[5],[6]
2.45%, due 11/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	31,621,000	[5],[6]
Financial Instruments, Owned, at Fair Value	31,652,000	[5],[6]
2.50%, due 5/1/2028 | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	11,602,000
Financial Instruments, Owned, at Fair Value	11,684,000
2.51%, due 10/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	132,173,000	[5],[6]	146,723,000	[7],[8]
Financial Instruments, Owned, at Fair Value	134,624,000	[5],[6]	153,519,000	[7],[8]
2.59%, due 8/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	32,449,000	[5],[6]
Financial Instruments, Owned, at Fair Value	33,100,000	[5],[6]
2.61%, due 4/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	33,452,000	[5],[6]
Financial Instruments, Owned, at Fair Value	34,159,000	[5],[6]
2.70%, due 6/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	63,146,000	[5],[6]	67,729,000	[7],[8]
Financial Instruments, Owned, at Fair Value	64,500,000	[5],[6]	70,933,000	[7],[8]
2.79%, due 4/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	147,912,000	[5],[6]
Financial Instruments, Owned, at Fair Value	151,537,000	[5],[6]
2.80%, due 3/1/2042 - 11/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	178,379,000	[5],[6]
Financial Instruments, Owned, at Fair Value	181,394,000	[5],[6]
2.81%, due 2/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	47,995,000	[5],[6]	55,367,000	[7],[8]
Financial Instruments, Owned, at Fair Value	49,217,000	[5],[6]	58,090,000	[7],[8]
2.83%, due 2/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	28,908,000	[5],[6]
Financial Instruments, Owned, at Fair Value	29,670,000	[5],[6]
2.85%, due 12/1/2041 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	47,276,000	[5],[6]	53,238,000	[7],[8]
Financial Instruments, Owned, at Fair Value	48,601,000	[5],[6]	55,952,000	[7],[8]
2.87%, due 1/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			59,639,000	[7],[8]
Financial Instruments, Owned, at Fair Value			63,234,000	[7],[8]
3.00%, due 2/1/2027 - 7/1/2028 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	4,155,940,000	[5]
Financial Instruments, Owned, at Fair Value	4,282,349,000	[5]
3.00%, due 2/1/2032 - 1/1/2033 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	928,513,000	[5]
Financial Instruments, Owned, at Fair Value	938,134,000	[5]
3.00%, due 12/1/2037 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	52,405,000	[5]
Financial Instruments, Owned, at Fair Value	51,275,000	[5]
3.00%, due 10/1/2042 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	43,743,000	[5]	46,277,000	[8]
Financial Instruments, Owned, at Fair Value	42,454,000	[5]	47,556,000	[8]
3.06%, due 9/1/2041 - 6/1/2042 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	67,059,000	[5],[6]
Financial Instruments, Owned, at Fair Value	68,750,000	[5],[6]
3.23%, due 3/1/2041 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	13,518,000	[5],[6]
Financial Instruments, Owned, at Fair Value	14,038,000	[5],[6]
3.35%, due 8/1/2041 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	23,589,000	[5],[6]
Financial Instruments, Owned, at Fair Value	24,497,000	[5],[6]
3.39%, due 5/1/2041 (a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	15,846,000	[5],[6]
Financial Instruments, Owned, at Fair Value	16,555,000	[5],[6]
3.50%, due 12/1/2025 - 5/1/2027 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	819,794,000	[5]
Financial Instruments, Owned, at Fair Value	854,647,000	[5]
3.50%, due 6/1/2042 - 7/1/2043 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	5,025,914,000	[5]
Financial Instruments, Owned, at Fair Value	5,110,687,000	[5]
4.00%, due 1/1/2026 - 6/1/2026 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	403,289,000	[5]
Financial Instruments, Owned, at Fair Value	425,298,000	[5]
4.00%, due 7/1/2043 - 8/1/2043 | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	976,713,000
Financial Instruments, Owned, at Fair Value	1,016,190,000
4.50%, due 4/1/2030 - 11/1/2030 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	99,541,000	[5]
Financial Instruments, Owned, at Fair Value	106,208,000	[5]
4.50%, due 11/1/2041 (a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	222,852,000	[5]
Financial Instruments, Owned, at Fair Value	236,114,000	[5]
2.19%, due 2/1/2043 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	29,578,000	[5],[6]
Financial Instruments, Owned, at Fair Value	29,675,000	[5],[6]
2.22%, due 12/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	47,795,000	[5],[6]	50,184,000	[7]
Financial Instruments, Owned, at Fair Value	48,060,000	[5],[6]	52,100,000	[7]
2.29%, due 11/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	96,202,000	[5],[6]
Financial Instruments, Owned, at Fair Value	96,962,000	[5],[6]
2.43%, due 6/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	36,825,000	[5],[6]	38,618,000	[7],[8]
Financial Instruments, Owned, at Fair Value	37,474,000	[5],[6]	40,336,000	[7],[8]
2.44%, due 4/1/2043 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	30,797,000	[5],[6]
Financial Instruments, Owned, at Fair Value	30,541,000	[5],[6]
2.45%, due 7/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	42,250,000	[5],[6]	46,980,000	[7],[8]
Financial Instruments, Owned, at Fair Value	42,979,000	[5],[6]	49,027,000	[7],[8]
2.45%, due 10/1/2042 - 11/1/2042(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			87,021,000	[7]
Financial Instruments, Owned, at Fair Value			90,808,000	[7]
2.53%, due 11/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	43,636,000	[5],[6]
Financial Instruments, Owned, at Fair Value	44,502,000	[5],[6]
2.54%, due 7/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	36,475,000	[5],[6]	41,200,000	[7],[8]
Financial Instruments, Owned, at Fair Value	37,214,000	[5],[6]	43,077,000	[7],[8]
2.56%, due 2/1/2043 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	118,113,000	[5],[6]
Financial Instruments, Owned, at Fair Value	118,529,000	[5],[6]
2.57%, due 2/1/2043 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	47,704,000	[5],[6]
Financial Instruments, Owned, at Fair Value	47,898,000	[5],[6]
2.59%, due 3/1/2042 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	31,610,000	[5],[6]	35,421,000	[7],[8]
Financial Instruments, Owned, at Fair Value	32,399,000	[5],[6]	37,203,000	[7],[8]
2.79%, due 12/1/2041 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	37,984,000	[5],[6]	42,260,000	[7],[8]
Financial Instruments, Owned, at Fair Value	38,911,000	[5],[6]	44,357,000	[7],[8]
3.32%, due 1/1/2041 (a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	31,882,000	[5],[6]
Financial Instruments, Owned, at Fair Value	33,373,000	[5],[6]
3.50%, due 4/1/2026 - 2/1/2027 (a) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	149,316,000	[5]
Financial Instruments, Owned, at Fair Value	155,127,000	[5]
3.50%, due 5/1/2043 - 6/1/2043 (a) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	1,061,638,000	[5]
Financial Instruments, Owned, at Fair Value	1,077,341,000	[5]
3.50%, due 7/1/2043 | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	300,000,000
Financial Instruments, Owned, at Fair Value	303,844,000
4.50%, due 12/1/2024 (a) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	12,804,000	[5]
Financial Instruments, Owned, at Fair Value	13,481,000	[5]
4.50%, due 2/1/2025 - 5/1/2025 (a) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	29,562,000	[5]
Financial Instruments, Owned, at Fair Value	31,154,000	[5]
3.50%, due 7/20/2040 (a)(b) | Ginnie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	89,988,000	[5],[6]	101,626,000	[7],[8]
Financial Instruments, Owned, at Fair Value	95,108,000	[5],[6]	108,469,000	[7],[8]
4.00%, due 1/20/2040 (a)(b) | Ginnie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	10,613,000	[5],[6]
Financial Instruments, Owned, at Fair Value	11,274,000	[5],[6]
10/15/2015 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	570,000		386,000
Derivative, Notional Amount	300,000,000		300,000,000
Derivative, Cap Interest Rate	1.43%		1.43%
11/8/2015 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	461,000		302,000
Derivative, Notional Amount	200,000,000		200,000,000
Derivative, Cap Interest Rate	1.36%		1.36%
5/23/2019 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	12,871,000		6,714,000
Derivative, Notional Amount	300,000,000		300,000,000
Derivative, Cap Interest Rate	2.00%		2.00%
6/1/2019 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	14,595,000		7,553,000
Derivative, Notional Amount	300,000,000		300,000,000
Derivative, Cap Interest Rate	1.75%		1.75%
6/29/2019 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	17,175,000		8,686,000
Derivative, Notional Amount	300,000,000		300,000,000
Derivative, Cap Interest Rate	1.50%		1.50%
7/2/2019 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	17,008,000		9,165,000
Derivative, Notional Amount	300,000,000		300,000,000
Derivative, Cap Interest Rate	1.50%		1.50%
7/16/2019 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	31,481,000		17,255,000
Derivative, Notional Amount	500,000,000		500,000,000
Derivative, Cap Interest Rate	1.25%		1.25%
3/26/2020 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	39,588,000
Derivative, Notional Amount	500,000,000
Derivative, Cap Interest Rate	1.25%
3/30/2020 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	56,084,000
Derivative, Notional Amount	700,000,000
Derivative, Cap Interest Rate	1.25%
5/20/2020 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	41,071,000
Derivative, Notional Amount	500,000,000
Derivative, Cap Interest Rate	1.25%
7/25/2022 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	57,551,000		36,880,000
Derivative, Notional Amount	500,000,000		500,000,000
Derivative, Cap Interest Rate	1.75%		1.75%
7/15/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(127,000)
Derivative, Notional Amount	300,000,000
Derivative, Fixed Interest Rate	1.37%
12/15/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(1,881,000)
Derivative, Notional Amount	400,000,000
Derivative, Fixed Interest Rate	1.31%
12/16/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(2,246,000)		(4,581,000)
Derivative, Notional Amount	500,000,000		500,000,000
Derivative, Fixed Interest Rate	1.28%		1.28%
12/16/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(1,798,000)
Derivative, Notional Amount	400,000,000
Derivative, Fixed Interest Rate	1.26%
12/17/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(1,883,000)
Derivative, Notional Amount	400,000,000
Derivative, Fixed Interest Rate	1.32%
7/1/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(1,361,000)
Derivative, Notional Amount	100,000,000
Derivative, Fixed Interest Rate	1.72%
7/16/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(3,561,000)
Derivative, Notional Amount	250,000,000
Derivative, Fixed Interest Rate	1.73%
8/16/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(2,209,000)
Derivative, Notional Amount	200,000,000
Derivative, Fixed Interest Rate	1.35%
9/23/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(5,716,000)
Derivative, Notional Amount	500,000,000
Derivative, Fixed Interest Rate	1.31%
10/6/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(2,368,000)
Derivative, Notional Amount	240,000,000
Derivative, Fixed Interest Rate	1.17%
2/14/2015 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(13,902,000)
Derivative, Notional Amount	500,000,000
Derivative, Fixed Interest Rate	2.15%
6/2/2016 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(10,045,000)
Derivative, Notional Amount	300,000,000
Derivative, Fixed Interest Rate	1.94%
12/19/2016 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(3,735,000)
Derivative, Notional Amount	250,000,000
Derivative, Fixed Interest Rate	1.43%
4/24/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	(3,410,000)
Derivative, Notional Amount	500,000,000
Derivative, Fixed Interest Rate	1.31%
7/13/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	10,627,000
Derivative, Notional Amount	750,000,000
Derivative, Fixed Interest Rate	0.86%
9/6/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	5,077,000
Derivative, Notional Amount	250,000,000
Derivative, Fixed Interest Rate	0.77%
9/6/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	5,104,000
Derivative, Notional Amount	250,000,000
Derivative, Fixed Interest Rate	0.77%
9/6/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	9,962,000
Derivative, Notional Amount	500,000,000
Derivative, Fixed Interest Rate	0.77%
11/29/2017(f) | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	11,482,000	[9]	1,121,000
Derivative, Notional Amount	500,000,000	[9]	500,000,000
Derivative, Fixed Interest Rate	0.87%	[9]	0.87%
2/21/2018 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	9,332,000
Derivative, Notional Amount	500,000,000
Derivative, Fixed Interest Rate	1.02%
2/27/2018 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	11,112,000
Derivative, Notional Amount	500,000,000
Derivative, Fixed Interest Rate	0.96%
4/25/2018(g) | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value	13,916,000	[10]
Derivative, Notional Amount	500,000,000	[10]
Derivative, Fixed Interest Rate	1.01%	[10]
2.15%, due 2/1/2043(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			100,000,000	[7]
Financial Instruments, Owned, at Fair Value			103,991,000	[7]
2.16%, due 10/1/2042(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			44,800,000	[7]
Financial Instruments, Owned, at Fair Value			46,452,000	[7]
2.17%, due 3/1/2043(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			30,000,000	[7]
Financial Instruments, Owned, at Fair Value			31,167,000	[7]
2.34%, due 11/1/2042(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			75,085,000	[7]
Financial Instruments, Owned, at Fair Value			78,162,000	[7]
2.38%, due 1/1/2043(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			100,237,000	[7],[8]
Financial Instruments, Owned, at Fair Value			104,444,000	[7],[8]
2.40%, due 9/1/2042 - 10/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			63,216,000	[7],[8]
Financial Instruments, Owned, at Fair Value			65,915,000	[7],[8]
2.41%, due 7/1/2042 - 9/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			69,629,000	[7],[8]
Financial Instruments, Owned, at Fair Value			72,585,000	[7],[8]
2.42%, due 11/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			75,395,000	[7],[8]
Financial Instruments, Owned, at Fair Value			78,710,000	[7],[8]
2.43%, due 2/1/2043(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			25,000,000	[7]
Financial Instruments, Owned, at Fair Value			26,174,000	[7]
2.44%, due 7/1/2042 - 10/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			241,204,000	[7],[8]
Financial Instruments, Owned, at Fair Value			251,833,000	[7],[8]
2.46%, due 6/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			57,508,000	[7],[8]
Financial Instruments, Owned, at Fair Value			60,021,000	[7],[8]
2.50%, due 2/1/2028 - 3/1/2028 | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			1,900,000,000
Financial Instruments, Owned, at Fair Value			1,985,203,000
2.57%, due 7/1/2042 - 2/1/2043(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			130,372,000	[7],[8]
Financial Instruments, Owned, at Fair Value			136,513,000	[7],[8]
2.58%, due 8/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			34,217,000
Financial Instruments, Owned, at Fair Value			35,801,000
2.60%, due 2/1/2043(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			50,000,000	[7]
Financial Instruments, Owned, at Fair Value			52,406,000	[7]
2.62%, due 7/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			46,138,000	[7],[8]
Financial Instruments, Owned, at Fair Value			48,256,000	[7],[8]
2.63%, due 4/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			35,609,000	[7],[8]
Financial Instruments, Owned, at Fair Value			37,264,000	[7],[8]
2.79%, due 1/1/2042 - 3/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			85,732,000	[7],[8]
Financial Instruments, Owned, at Fair Value			89,912,000	[7],[8]
2.80%, due 2/1/2042 - 11/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			349,671,000	[7],[8]
Financial Instruments, Owned, at Fair Value			366,718,000	[7],[8]
2.84%, due 2/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			32,607,000	[7],[8]
Financial Instruments, Owned, at Fair Value			34,247,000	[7],[8]
2.89%, due 2/1/2042(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			40,377,000	[7],[8]
Financial Instruments, Owned, at Fair Value			42,409,000	[7],[8]
3.00%, due 1/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			29,557,000	[7],[8]
Financial Instruments, Owned, at Fair Value			31,002,000	[7],[8]
3.00%, due 2/1/2027 - 12/1/2027(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			6,794,861,000	[8]
Financial Instruments, Owned, at Fair Value			7,183,772,000	[8]
3.00%, due 2/1/2032 - 2/1/2033(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			967,503,000	[8]
Financial Instruments, Owned, at Fair Value			1,018,411,000	[8]
3.02%, due 12/1/2040(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			101,591,000	[7],[8]
Financial Instruments, Owned, at Fair Value			106,680,000	[7],[8]
3.04%, due 9/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			38,752,000	[7],[8]
Financial Instruments, Owned, at Fair Value			40,639,000	[7],[8]
3.05%, due 9/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			36,363,000	[7],[8]
Financial Instruments, Owned, at Fair Value			38,205,000	[7],[8]
3.06%, due 6/1/2042(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			37,791,000	[7]
Financial Instruments, Owned, at Fair Value			40,031,000	[7]
3.16%, due 9/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			31,611,000	[7],[8]
Financial Instruments, Owned, at Fair Value			33,343,000	[7],[8]
3.18%, due 11/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			27,672,000	[7],[8]
Financial Instruments, Owned, at Fair Value			29,179,000	[7],[8]
3.21%, due 9/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			84,111,000	[7],[8]
Financial Instruments, Owned, at Fair Value			88,670,000	[7],[8]
3.24%, due 3/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			15,547,000	[7],[8]
Financial Instruments, Owned, at Fair Value			16,389,000	[7],[8]
3.26%, due 4/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			38,941,000	[7],[8]
Financial Instruments, Owned, at Fair Value			40,970,000	[7],[8]
3.30%, due 5/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			31,843,000	[7],[8]
Financial Instruments, Owned, at Fair Value			33,499,000	[7],[8]
3.35%, due 8/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			27,024,000	[7],[8]
Financial Instruments, Owned, at Fair Value			28,827,000	[7],[8]
3.36%, due 6/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			81,763,000	[7],[8]
Financial Instruments, Owned, at Fair Value			86,263,000	[7],[8]
3.38%, due 5/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			17,894,000	[7],[8]
Financial Instruments, Owned, at Fair Value			18,822,000	[7],[8]
3.50%, due 7/1/2021(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			207,091,000	[8]
Financial Instruments, Owned, at Fair Value			219,747,000	[8]
3.50%, due 12/1/2025 - 2/1/2028(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			1,481,478,000	[8]
Financial Instruments, Owned, at Fair Value			1,572,774,000	[8]
3.50%, due 8/1/2042 - 3/1/2043(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			3,209,041,000	[8]
Financial Instruments, Owned, at Fair Value			3,425,338,000	[8]
3.61%, due 6/1/2041(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			49,197,000	[7],[8]
Financial Instruments, Owned, at Fair Value			52,170,000	[7],[8]
3.65%, due 7/1/2040(a)(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			29,174,000	[7],[8]
Financial Instruments, Owned, at Fair Value			30,810,000	[7],[8]
3.99%, due 9/1/2039(b) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount	9,542,000	[5],[6]	11,717,000	[7]
Financial Instruments, Owned, at Fair Value	10,135,000	[5],[6]	12,432,000	[7]
4.00%, due 1/1/2025 - 6/1/2026(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			613,772,000	[8]
Financial Instruments, Owned, at Fair Value			657,599,000	[8]
4.00%, due 8/1/2042(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			106,594,000	[8]
Financial Instruments, Owned, at Fair Value			114,664,000	[8]
4.50%, due 2/1/2028 - 11/1/2030(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			136,333,000	[8]
Financial Instruments, Owned, at Fair Value			147,730,000	[8]
4.50%, due 11/1/2041(a) | Fannie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			256,057,000	[8]
Financial Instruments, Owned, at Fair Value			277,486,000	[8]
2.30%, due 11/1/2042(a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			99,093,000	[7],[8]
Financial Instruments, Owned, at Fair Value			103,022,000	[7],[8]
2.52%, due 9/1/2042(a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			122,825,000	[7],[8]
Financial Instruments, Owned, at Fair Value			128,547,000	[7],[8]
2.55%, due 11/1/2042(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			54,278,000	[7]
Financial Instruments, Owned, at Fair Value			56,826,000	[7]
3.27%, due 6/1/2041(a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			32,330,000	[7],[8]
Financial Instruments, Owned, at Fair Value			33,995,000	[7],[8]
3.30%, due 1/1/2041(a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			35,460,000	[7],[8]
Financial Instruments, Owned, at Fair Value			37,608,000	[7],[8]
3.50%, due 4/1/2026 - 2/1/2027(a) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			187,349,000	[8]
Financial Instruments, Owned, at Fair Value			197,014,000	[8]
3.63%, due 6/1/2041(a)(b) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			32,394,000	[7],[8]
Financial Instruments, Owned, at Fair Value			34,105,000	[7],[8]
4.50%, due 12/1/2024 - 5/1/2025(a) | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			52,637,000	[8]
Financial Instruments, Owned, at Fair Value			56,006,000	[8]
4.00%, due 1/20/2040(a)(b) | Ginnie Mae Pools [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			12,875,000	[7],[8]
Financial Instruments, Owned, at Fair Value			13,818,000	[7],[8]
0.06%, due 2/7/2013(a)(d) | US Treasury Bill [Member]
Investment Holdings [Line Items]
Debt Instrument, Face Amount			38,000,000	[11],[8]
Financial Instruments, Owned, at Fair Value			37,999,000	[11],[8]
12/30/2014 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			38,000
Derivative, Notional Amount			200,000,000
Derivative, Cap Interest Rate			2.07%
7/16/2022 | Interest Rate Cap Contracts [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			36,010,000
Derivative, Notional Amount			500,000,000
Derivative, Cap Interest Rate			1.75%
12/15/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(3,773,000)
Derivative, Notional Amount			400,000,000
Derivative, Fixed Interest Rate			1.31%
12/16/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(3,602,000)
Derivative, Notional Amount			400,000,000
Derivative, Fixed Interest Rate			1.26%
12/17/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(3,838,000)
Derivative, Notional Amount			400,000,000
Derivative, Fixed Interest Rate			1.32%
7/1/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(2,049,000)
Derivative, Notional Amount			100,000,000
Derivative, Fixed Interest Rate			1.72%
7/16/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(5,309,000)
Derivative, Notional Amount			250,000,000
Derivative, Fixed Interest Rate			1.73%
8/16/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(3,246,000)
Derivative, Notional Amount			200,000,000
Derivative, Fixed Interest Rate			1.35%
9/23/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(8,167,000)
Derivative, Notional Amount			500,000,000
Derivative, Fixed Interest Rate			1.31%
10/6/2014 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(3,405,000)
Derivative, Notional Amount			240,000,000
Derivative, Fixed Interest Rate			1.17%
5/26/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(529,000)
Derivative, Notional Amount			100,000,000
Derivative, Fixed Interest Rate			1.60%
6/28/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(1,574,000)
Derivative, Notional Amount			300,000,000
Derivative, Fixed Interest Rate			1.38%
7/15/2013 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(1,706,000)
Derivative, Notional Amount			300,000,000
Derivative, Fixed Interest Rate			1.37%
2/14/2015 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(18,564,000)
Derivative, Notional Amount			500,000,000
Derivative, Fixed Interest Rate			2.15%
6/2/2016 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(14,320,000)
Derivative, Notional Amount			300,000,000
Derivative, Fixed Interest Rate			1.94%
12/19/2016 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(7,996,000)
Derivative, Notional Amount			250,000,000
Derivative, Fixed Interest Rate			1.43%
4/24/2017(g) | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(11,556,000)
Derivative, Notional Amount			500,000,000
Derivative, Fixed Interest Rate			1.31%
7/13/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(4,117,000)
Derivative, Notional Amount			750,000,000
Derivative, Fixed Interest Rate			0.86%
9/6/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			33,000
Derivative, Notional Amount			250,000,000
Derivative, Fixed Interest Rate			0.77%
9/6/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			26,000
Derivative, Notional Amount			250,000,000
Derivative, Fixed Interest Rate			0.77%
9/6/2017 | Interest Rate Swap [Member]
Investment Holdings [Line Items]
Financial Instruments, Owned, at Fair Value			(243,000)
Derivative, Notional Amount			$ 500,000,000
Derivative, Fixed Interest Rate			0.77%

[1] Derived from audited financial statements.

[2] Percentage of net assets.

[3] Comprised of investments that were individually less than 1% of net assets.

[4] The Company’s interest rate swap contracts receive a floating rate set quarterly to three month LIBOR.

[5] Securities or a portion of the securities are pledged as collateral for repurchase agreements, interest rate swap contracts, or forward settling transactions.

[6] The coupon rate shown on floating or adjustable rate securities represents the rate at June 30, 2013.

[7] The coupon rate shown on floating or adjustable rate securities represents the rate at December 31, 2012.

[8] rived from audited financial statements.(a)Securities or a portion of the securities are pledged as collateral for repurchase agreements, interest rate swa

[9] The interest rate swap effective date is November 29, 2013 and does not accrue any income or expense until that date.

[10] The interest rate swap effective date is April 25, 2014 and does not accrue any income or expense until that date.

[11] Zero coupon bond, rate shown represents purchase yield.

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Earnings Per Share (Notes)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

EARNINGS PER SHARE

Components of the computation of basic and diluted EPS were as follows (in thousands except per share numbers):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income (loss)	$	(398,286	)	$	101,705		$	(414,489	)	$	170,823
Less preferred stock dividends	(3,995		)	—			(5,448		)	—
Net income (loss) available to common shares	(402,281		)	101,705			(419,937		)	170,823
Less dividends paid:
Common shares	(58,442		)	(59,087		)	(114,029		)	(116,779		)
Unvested shares	(304		)	(378		)	(589		)	(755		)
Undistributed earnings (loss)	(461,027		)	42,240			(534,555		)	53,289
Basic weighted average shares outstanding:
Common shares	173,252			116,126			173,693			110,039
Basic earnings (loss) per common share:
Distributed earnings	$	0.34		$	0.51		$	0.66		$	1.06
Undistributed earnings (loss)	(2.66		)	0.36			(3.08		)	0.48
Basic earnings (loss) per common share	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54
Diluted weighted average shares outstanding:
Common shares	173,252			116,126			173,693			110,039
Net effect of dilutive stock options (1)	—			—			—			—
	173,252			116,126			173,693			110,039
Diluted earnings (loss) per common share:
Distributed earnings	$	0.34		$	0.51		$	0.66		$	1.06
Undistributed earnings (loss)	(2.66		)	0.36			(3.08		)	0.48
Diluted earnings (loss) per common share	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54

__________________

(1)For the three and six months endedJune 30, 2013 and 2012, the Company had an aggregate of 131 stock options outstanding with a weighted average exercise price of $30.00 that were not included in the calculation of EPS, as their inclusion would have been anti-dilutive. These instruments may have a dilutive impact on future EPS.

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Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended			3 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Agency RMBS [Member]	Dec. 31, 2012 Agency RMBS [Member]	Jun. 30, 2013 Minimum [Member] D	Jun. 30, 2013 Maximum [Member] D
Significant Accounting Policies [Line Items]
Percentage Of Reit Taxable Income That Must Be Distributed To Stockholders	90.00%
Repurchase agreement period (in days)				30	90
Security Owned and Pledged as Collateral, Fair Value		$ 116.4	$ 10.4

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule Of Computation Of Basic And Diluted Earnings Per Share

Components of the computation of basic and diluted EPS were as follows (in thousands except per share numbers):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income (loss)	$	(398,286	)	$	101,705		$	(414,489	)	$	170,823
Less preferred stock dividends	(3,995		)	—			(5,448		)	—
Net income (loss) available to common shares	(402,281		)	101,705			(419,937		)	170,823
Less dividends paid:
Common shares	(58,442		)	(59,087		)	(114,029		)	(116,779		)
Unvested shares	(304		)	(378		)	(589		)	(755		)
Undistributed earnings (loss)	(461,027		)	42,240			(534,555		)	53,289
Basic weighted average shares outstanding:
Common shares	173,252			116,126			173,693			110,039
Basic earnings (loss) per common share:
Distributed earnings	$	0.34		$	0.51		$	0.66		$	1.06
Undistributed earnings (loss)	(2.66		)	0.36			(3.08		)	0.48
Basic earnings (loss) per common share	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54
Diluted weighted average shares outstanding:
Common shares	173,252			116,126			173,693			110,039
Net effect of dilutive stock options (1)	—			—			—			—
	173,252			116,126			173,693			110,039
Diluted earnings (loss) per common share:
Distributed earnings	$	0.34		$	0.51		$	0.66		$	1.06
Undistributed earnings (loss)	(2.66		)	0.36			(3.08		)	0.48
Diluted earnings (loss) per common share	$	(2.32	)	$	0.87		$	(2.42	)	$	1.54

__________________

(1)For the three and six months endedJune 30, 2013 and 2012, the Company had an aggregate of 131 stock options outstanding with a weighted average exercise price of $30.00 that were not included in the calculation of EPS, as their inclusion would have been anti-dilutive. These instruments may have a dilutive impact on future EPS.

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Subsequent Events (Details)	1 Months Ended
	Jul. 31, 2013
Subsequent Event [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	11,865
Weighted Average, CPR	12.00%

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(Investments)(Assets And Liabilities Measured At Fair Value On A Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	$ 17,583,271	$ 20,985,887
Financial Instruments, Owned, at Fair Value	17,218,204	20,861,718	[1]
Derivative Financial Instruments, Liabilities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liabilities, Fair Value Disclosure	54,242	98,575
US Treasury Bill [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure		37,999
Derivative Financial Instruments, Assets [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	365,067	124,169
Other Investments [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	6,945	19,576
Agency RMBS [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	17,211,259	20,804,143
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	37,999
Fair Value, Inputs, Level 1 [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liabilities, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | US Treasury Bill [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure		37,999
Fair Value, Inputs, Level 1 [Member] | Derivative Financial Instruments, Assets [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Other Investments [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Agency RMBS [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	6,945	19,576
Fair Value, Inputs, Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liabilities, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | US Treasury Bill [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure		0
Fair Value, Inputs, Level 3 [Member] | Derivative Financial Instruments, Assets [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Other Investments [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	6,945	19,576
Fair Value, Inputs, Level 3 [Member] | Agency RMBS [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	17,576,326	20,928,312
Fair Value, Inputs, Level 2 [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liabilities, Fair Value Disclosure	54,242	98,575
Fair Value, Inputs, Level 2 [Member] | US Treasury Bill [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure		0
Fair Value, Inputs, Level 2 [Member] | Derivative Financial Instruments, Assets [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	365,067	124,169
Fair Value, Inputs, Level 2 [Member] | Other Investments [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Agency RMBS [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	$ 17,211,259	$ 20,804,143

[1] Derived from audited financial statements.

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Investments In Securities And Interest Rate Swap And Cap Contracts (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		3 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Agency RMBS [Member]	Dec. 31, 2011 Agency RMBS [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Agency RMBS and U.S.Treasuries received as collateral on interest rate cap contracts		$ 18.4
Maximum Period Of Short Term Assets And Liabilities Are Measured At Deemed To Appropriate Fair Value	120
Unobservable input capitalization minimum rate	4.00%
Percentage of hybrid ARMs reset to variable rate	100.00%
Trading Securities Pledged as Collateral	86.5	127.6
Unamortized premium on marketable securities			726.9	879.6
Debt Instrument, Maturity Date			30
Average final contractual maturity of Agency RMBS portfolio			2037	2033
Securities Received as Collateral	$ 209.1
Unobservable input capitalization maximum rate	5.00%

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Borrowings (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013 D		Dec. 31, 2012 D
Short-term Debt [Abstract]
Securities Sold under Agreements to Repurchase	$ 13,809,319		$ 13,981,307	[1]
Accrued interest payable, accrued interest on repurchase agreements	3,293		11,717
Short-term Debt, Weighted Average Interest Rate	0.39%		0.48%
Weighted Average Remaining Maturity (In Days)	41.9		19.6
Fair value of the collateral	$ 14,493,844	[2]	$ 14,693,645	[2]
Number of repurchase agreements exceeding 10% of net assets	0		0
Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets [Table Text Block]	10.00%		10.00%
RepoPercentageofNetAssets	10.00%

[1] Derived from audited financial statements.

[2] Collateral for repurchase agreements consists of Agency RMBS, U.S. Treasuries and Agency Debentures.

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(Investments)(Summary Of Interest Rate Swap And Cap Contracts) (Details) (USD $)				6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Jun. 30, 2013 February Two Thousand And Thirteen Opened Type [Member]	Jun. 30, 2013 April 2012 Opened Type [Member]	Jun. 30, 2013 March Two Thousand And Thirteen Terminated Type [Member]	Jun. 30, 2013 May 2012 Opened Type [Member]	Jun. 30, 2013 March Two Thousand And Thirteen Opened Type [Member]	Jun. 30, 2013 June 2012 Opened Type [Member]	Jun. 30, 2013 June Two Thousand And Thirteen Matured Type [Member]	Jun. 30, 2013 June Two Thousand And Thirteen Terminated Type [Member]	Jun. 30, 2013 May Two Thousand And Thirteen Matured Type [Member]	Jun. 30, 2013 May Two Thousand And Thirteen Opened Type [Member]	Jun. 30, 2013 April Two Thousand And Thirteen Opened Type [Member]
Summary Of Interest Rate Swap And Cap Contracts [Line Items]
Derivative, Collateral, Obligation to Return Cash	$ 106,700,000	$ 28,900,000
Trade Date				February 2013	April 2012	March 2013	May 2012	March 2013	June 2012	June 2013	June 2013	May 2013	May 2013	April 2013
Derivative, Notional Amount	$ 2,100,000,000		$ 1,700,000,000	$ 1,500,000,000	$ 500,000,000	$ (500,000,000)	$ 600,000,000	$ 1,200,000,000	$ 600,000,000	$ (300,000,000)	$ (700,000,000)	$ (100,000,000)	$ 500,000,000	$ 500,000,000

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Document Period End Date					Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	131,088		131,088		131,088	131,088
Net income	$ (398,286)		$ 101,705		$ (414,489)	$ 170,823
DIVIDENDS ON PREFERRED STOCK	(3,995)		0		(5,448)	0
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	(402,281)		101,705		(419,937)	170,823
Common shares	(58,442)		(59,087)		(114,029)	(116,779)
Unvested shares	(304)		(378)		(589)	(755)
Undistributed earnings	$ (461,027)		$ 42,240		$ (534,555)	$ 53,289
Common shares	173,252,000		116,126,000		173,693,000	110,039,000
Distributed earnings, basic	$ 0.34		$ 0.51		$ 0.66	$ 1.06
Undistributed earnings, basic	$ (2.66)		$ 0.36		$ (3.08)	$ 0.48
Basic earnings per common share	$ (2.32)		$ 0.87		$ (2.42)	$ 1.54
Net effect of dilutive warrants	0	[1]	0	[1]	0	0
Diluted weighted average shares outstanding	173,252,000		116,126,000		173,693,000	110,039,000
Distributed earnings, diluted	$ 0.34		$ 0.51		$ 0.66	$ 1.06
Undistributed earnings, diluted	$ (2.66)		$ 0.36		$ (3.08)	$ 0.48
Diluted earnings per common share	$ (2.32)		$ 0.87
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number	131				131
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price	$ 30.00		$ 30.00		$ 30.00	$ 30.00
Earnings Per Share, Basic and Diluted	$ (2.32)		$ 0.87		$ (2.42)	$ 1.54

[1] For the three and six months ended June 30, 2013 and 2012, the Company had an aggregate of 131 stock options outstanding with a weighted average exercise price of $30.00 that were not included in the calculation of EPS, as their inclusion would have been anti-dilutive. These instruments may have a dilutive impact on future EPS.

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Condensed Statement Of Changes In Net Assets (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Net income (loss):
Net investment income	$ 61,833	$ 114,350
Net realized gain (loss) on investments	(211,418)	(164,738)
Net unrealized appreciation (depreciation) on investments	(444,877)	(570,368)
Net gain (loss) from swap and cap contracts	196,176	206,267
Net income (loss)	(398,286)	(414,489)
Dividends on preferred stock	(3,995)	(5,448)
Net income (loss) available to common shares	(402,281)	(419,937)
Capital transactions:
Net proceeds (payments) from issues and repurchase of common shares	(18,843)	(26,672)
Net proceeds from issuance of preferred shares	193,550	193,550
Distributions to common stockholders	(58,746)	(114,618)
Amortization of share based compensation	897	1,668
Increase (decrease) in net assets from capital transactions	116,858	53,928
Total increase (decrease) in net assets	(285,423)	(366,009)
Net assets:
Beginning of period	2,322,076	2,402,662	[1]
End of period	$ 2,036,653	$ 2,036,653

[1] Derived from audited financial statements.

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Orginazation

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

ORGANIZATION

CYS Investments, Inc. (the “Company”) was formed as a Maryland corporation on January 3, 2006, and commenced operations on February 10, 2006. The Company has elected to be taxed and intends to continue to qualify as a real estate investment trust (“REIT”) and is required to comply with the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), with respect thereto. Since March 2008, the Company has primarily purchased residential mortgage-backed securities that are issued and the principal and interest of which are guaranteed by a federally chartered corporation (“Agency RMBS”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or an agency of the U.S. government such as the Government National Mortgage Association (“Ginnie Mae”), or U.S. Treasuries securities. On December 10, 2012 the Company's board of directors amended and restated its investment guidelines to permit the company to invest in (i) Agency RMBS, (ii) collateralized mortgage obligations issued by a government agency or government-sponsored entity that are collateralized by Agency RMBS and (iii) debt securities issued by the United States Department of Treasury ("U.S. Treasury Securities") or a government sponsored entity that is not backed by collateral but, in the case of government agencies, is backed by the full faith and credit of the U.S. government, and, in the case of government sponsored entities, is backed by the integrity and creditworthiness of the issuer (“US Agency Debentures”). The Company’s common stock, Series A Cumulative Redeemable Preferred Stock, $25.00 liquidation preference (the "Series A Preferred Stock"), and Series B Cumulative Redeemable Preferred Stock, $25.00 liquidation preference (the "Series B Preferred Stock"), trade on the New York Stock Exchange under the symbols “CYS,” "CYS PrA" and "CYS PrB," respectively.

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Investments In Securities And Interest Rate Swap And Cap Contracts (Notes)

6 Months Ended

Jun. 30, 2013

Derivative, Fair Value, Net [Abstract]

Investments In Securities And Interest Rate Swap And Cap Contracts

INVESTMENTS IN SECURITIES AND INTEREST RATE SWAP AND CAP CONTRACTS AND OTHER ASSETS

The Company’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. ASC 820, Fair Value Measurements, classifies these inputs into the following hierarchy:

Level 1 Inputs—Quoted prices for identical instruments in active markets.

Level 2 Inputs—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs—Instruments with primarily unobservable value drivers.

Excluded from the tables below are financial instruments carried on the accompanying financial statements at cost basis, which is deemed to approximate fair value, primarily due to the short duration of these instruments, including cash and cash equivalents, receivables, payables and borrowings under repurchase arrangements with initial terms of 120 days or less. The fair value of these instruments is determined using level two inputs. The following tables provide a summary of the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

June 30, 2013	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Agency RMBS	$	—	$	17,211,259	$	—	$	17,211,259
Other Investments	—		—		6,945		6,945
Derivative assets	—		365,067		—		365,067
Total	$	—	$	17,576,326	$	6,945	$	17,583,271
Liabilities
Derivative liabilities	$	—	$	54,242	$	—	$	54,242

December 31, 2012	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Agency RMBS	$	—	$	20,804,143	$	—	$	20,804,143
U.S. Treasury Bills	37,999		—		—		37,999
Other Investments	—		—		19,576		19,576
Derivative assets	—		124,169		—		124,169
Total	$	37,999	$	20,928,312	$	19,576	$	20,985,887
Liabilities
Derivative liabilities	$	—	$	98,575	$	—	$	98,575

Other investments is comprised of CLOs and real estate assets. The table below presents a reconciliation of changes in other investments classified as Level 3 in the Company’s financial statements for the three and six months endedJune 30, 2013 and 2012. CLOs were generally valued using valuations provided by broker quotations. The Company validated the broker quotations using internal discounted cash flow models. The significant unobservable inputs used in the fair value measurement of the Company’s CLOs were prepayment rates, probability of default, and recovery rate in the event of default. Significant changes in any of those inputs in isolation would have resulted in a materially different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity upon default and a directionally opposite change in the assumption used for prepayment rates. The Company did not own any CLOs as of June 30, 2013. The weighted average inputs to the models as of December 31, 2012 were:

	Constant  Prepayment Rate		Default Rate		Recovery Rate		Recovery Lag
December 31, 2012	20	%	2	%	69	%	6 Months

Fair values of real estate assets are valued based on discounted cash flow models. A discussion of the method of fair valuing these assets is included above in Note 2 “Investment Valuation.” The significant unobservable input used in the fair value measurement is capitalization rates, which the Company estimated to be between 4% and 5% at June 30, 2013 and December 31, 2012.  

Level 3 Fair Value Reconciliation

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Other investments	2013			2012			2013			2012
Beginning balance level 3 assets	$	8,495		$	21,415		$	19,576		$	18,675
Cash payments recorded as a reduction of cost basis	(88		)	(1,063		)	(324		)	(2,118		)
Change in net unrealized appreciation (depreciation)	(1,203		)	(2,478		)	(6,721		)	1,317
Net purchases (sales)	(1,550		)	6,928			(12,005		)	6,928
Net gain (loss) on sales	1,291			—			6,419			—
Transfers into (out of) level 3	—			—			—			—
Ending balance level 3 assets	$	6,945		$	24,802		$	6,945		$	24,802

The Agency RMBS portfolio consisted of Agency RMBS as follows:

June 30, 2013	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
15 Year Fixed Rate	$	5,582,309	$	5,773,741	$	104.51	$	103.43	N/A	3.17	%	15.2	%
20 Year Fixed Rate	1,028,057		1,044,339		104.91		101.58		N/A	3.15	%	7.6	%
30 Year Fixed Rate	7,683,260		7,837,908		104.30		102.01		N/A	3.59	%	7.8	%
Hybrid ARMs	2,511,218		2,555,271		103.74		101.75		74.8	2.59	%	17.4	%
Total/Weighted Average	$	16,804,844	$	17,211,259	$	104.32	$	102.42		3.27	%	13.5	%

December 31, 2012	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
10 Year Fixed Rate	$	207,091	$	219,747	$	103.60	$	106.11	N/A	3.50	%	19.4	%
15 Year Fixed Rate	11,092,374		11,717,136		104.32		105.63		N/A	3.05	%	16.1	%
20 Year Fixed Rate	1,087,835		1,148,932		104.96		105.62		N/A	3.17	%	10.1	%
30 Year Fixed Rate	3,571,692		3,817,488		105.78		106.88		N/A	3.59	%	8.9	%
Hybrid ARMs	3,722,510		3,900,840		103.54		104.79		74.3	2.71	%	19.1	%
Total/Weighted Average	$	19,681,502	$	20,804,143	$	104.47	$	105.70		3.10	%	15.8	%

__________________

⁽¹⁾  MTR, or “Months to Reset” is the weighted average number of months remaining before the fixed rate on a hybrid ARM becomes a variable rate. At the end of the fixed period, the variable rate will be determined by the margin and the pre-specified caps of the ARM. After the fixed period, 100% of the hybrid ARMS in the portfolio reset annually.

⁽²⁾  CPR, or “Constant Prepayment Rate,” is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the constant prepayment rate is an annualized version of the prior three month prepayment rate. Securities with no prepayment history are excluded from this calculation.

As of June 30, 2013 and December 31, 2012, the Company’s Agency RMBS were purchased at a net premium to their par value with approximately $726.9 million and $879.6 million, respectively, of unamortized premium included in their cost basis. The premium purchase price is due to the average coupon interest rates on these investments being higher than prevailing market rates.

Actual maturities of Agency RMBS are generally shorter than stated contractual maturities (which range up to 30 years), as they are affected by the contractual lives of the underlying mortgages, periodic payments and prepayments of principal. As of June 30, 2013 and December 31, 2012, the average final contractual maturity of the Company’s Agency RMBS portfolio is in year 2037 and 2033, respectively.

In order to mitigate its interest rate exposure, the Company enters into interest rate swap and cap contracts. The Company had the following activity in interest rate swap and cap transactions during the three and six months endedJune 30, 2013 and 2012 (in thousands):

Three and Six Months Ended June 30, 2013					Three and Six Months Ended June 30, 2012
Trade Date	Transaction	Notional			Trade Date	Transaction	Notional
February 2013	Opened	$	1,500,000		April 2012	Opened	$	500,000
March 2013	Terminated	(500,000		)	May 2012	Opened	600,000
March 2013	Opened	1,200,000			June 2012	Opened	600,000
April 2013	Opened	500,000			Net Increase		$	1,700,000
May 2013	Opened	500,000
May 2013	Matured	(100,000		)
June 2013	Terminated	(700,000		)
June 2013	Matured	(300,000		)
Net Increase		$	2,100,000

As of June 30, 2013 and December 31, 2012, the Company had pledged Agency RMBS and U.S Treasury securities with a fair value of $86.5 million and $127.6 million, respectively, as collateral on interest rate swap and cap contracts. The Company had Agency RMBS and U.S. Treasuries of $209.1 million and cash of $106.7 million pledged to it as collateral for its interest rate swap and cap contracts as of June 30, 2013. In addition, the Company had Agency RMBS and U.S. Treasuries of $18.4 million and cash of $28.9 million pledged to it as collateral for its interest rate cap contracts as of December 31, 2012. Below is a summary of our interest rate swap and cap contracts open as of June 30, 2013 and December 31, 2012 and the net gain and loss on swap and cap contracts for the three and six months ended June 30, 2013 and 2012 (in thousands):

Derivatives not designated as hedging instruments under ASC 815(a)
Interest Rate Swap Contracts	Notional Amount		Fair Value			Statement of Assets and Liabilities Location
June 30, 2013	$	4,840,000	$	(54,242	)	Derivative liabilities, at fair value
June 30, 2013	3,750,000		76,612			Derivative assets, at fair value
December 31, 2012	6,490,000		(98,575		)	Derivative liabilities, at fair value
December 31, 2012	1,000,000		1,180			Derivative assets, at fair value
Interest Rate Cap Contracts	Notional Amount		Fair Value			Statement of Assets and Liabilities Location
June 30, 2013	$	4,400,000	$	288,455		Derivative assets, at fair value
December 31, 2012	3,400,000		122,989			Derivative assets, at fair value

		Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments Under ASC 815(a)	Location of Gain or (Loss) Recognized in Income on Derivative	Three Months Ended June 30,					Six Months Ended June 30,
		2013		2012			2013		2012
Interest rate swap and cap contracts	Net gain (loss) from swap and cap contracts	$	196,176	$	(24,356	)	$	206,267	$	(41,785	)

__________________

(a) See Note 2 for additional information on the Company’s purpose for entering into interest rate swaps and caps and the decision not to designate them as hedging instruments.

Credit Risk

At June 30, 2013 and December 31, 2012, the Company continued to have minimal exposure to credit losses on its mortgage assets by owning principally Agency RMBS. The payment of principal and interest on Agency RMBS is guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae. In September 2008, both Freddie Mac and Fannie Mae were placed in the conservatorship of the United States government.

On August 5, 2011, Standard & Poor’s downgraded the U.S.’s credit rating to AA+ for the first time. Because Fannie Mae and Freddie Mac are in conservatorship of the U.S. Government, the implied credit ratings of Agency RMBS guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae were also downgraded to AA+. While this downgrade did not have a significant impact on the fair value of the Agency RMBS in the Company’s portfolio, it has increased the uncertainty regarding the credit risk of Agency RMBS.

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Significant Accounting Policies (Notes)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying interim unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended December 31, 2012, included in the annual report on Form 10-K. The results for interim periods are not necessarily indicative of the results to be expected for the fiscal year.

The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Clarification of the Scope of Audit and Accounting Guide Investment Companies (“ASC 946”), prior to its deferral in February 2008. Under ASC 946, the Company uses financial reporting for investment companies.

Segment Reporting

The Company operates as a single segment reporting to the Chief Executive Officer, who manages the entire investment portfolio.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those management estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash held in banks and highly liquid investments with original maturities of three months or less. Interest income earned on cash and cash equivalents is recorded in other income.

Interest Rate Swap and Cap Contracts

The Company utilizes interest rate swaps and caps to hedge the interest rate risk associated with the financing of its portfolio. Specifically, the Company seeks to hedge the exposure to potential interest rate mismatches between the interest earned on investments and the borrowing costs caused by fluctuations in short term interest rates. In a simple interest rate swap, one investor pays a floating rate of interest on a notional principal amount and receives a fixed rate of interest on the same notional principal amount for a specified period of time. Alternatively, an investor may pay a fixed rate and receive a floating rate. In a simple interest rate cap, one investor pays a premium for a notional principal amount based on a capped interest rate (the “cap rate”). If the floating interest rate (the “floating rate”) exceeds the cap rate, the investor receives a payment from the cap counterparty equal to the difference between the floating rate and the cap rate on the same notional principal amount for a specified period of time. Alternatively, an investor may receive a premium and pay the difference in cap rate and floating rate.

During the term of the interest rate swap or cap, the Company makes or receives periodic payments and unrealized gains or losses are recorded as a result of marking the swap and cap to their fair value. When the swap or cap is terminated, the Company records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company’s cost basis in the contract, if any. The periodic payments, amortization of premiums on cap contracts and any realized or unrealized gains or losses are reported under gains and losses from swap and cap contracts in the statements of operations. Swaps involve a risk that interest rates will move contrary to the Company’s expectations, thereby increasing the Company’s payment obligation.

Because the Company uses financial reporting for investment companies, its investments, including its interest rate swap and cap contracts, are carried at fair value with changes in fair value included in earnings. Consequently, there would be no impact to designating interest rate swaps and caps as cash flow or fair value hedges under GAAP.

The Company's interest rate swap and cap contracts are subject to master netting arrangements. The Company is exposed to credit loss in the event of nonperformance by the counterparty to the swap or cap limited to the fair value of collateral posted in excess of the fair value of the contract. As of June 30, 2013 and December 31, 2012, the Company did not anticipate nonperformance by any counterparty. Should interest rates move unexpectedly, the Company may not achieve the anticipated benefits of the interest rate swap or cap and may realize a loss.

Investment Valuation

The Company has established a pricing committee responsible for establishing valuation policies and procedures as well as approving valuations on a monthly basis at a pricing meeting. The pricing committee is made up of individuals from the accounting team, the investment team and senior management.

Agency RMBS, Agency Debentures and U.S. Treasury securities are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security.

Interest rate swaps and caps are generally valued using valuations provided by broker quotations. Such broker quotations are based on the present value of fixed and projected floating rate cash flows over the term of the swap contract. Future cash flows are discounted to their present value using swap rates provided by electronic data services or by broker.

Fair values of long-lived assets, including real estate, are primarily derived internally and are based on observed sales transactions for similar assets. For real estate, fair values are based on discounted cash flow estimates which reflect current and projected lease profiles and available industry information about capitalization rates and expected trends in rents and occupancy.  

All valuations received from third party pricing services or broker quotes are non-binding. The Company does not adjust any of the prices received from third party pricing services or brokers, and all prices are reviewed by the Company. This review includes comparisons of similar market transactions, alternative third party pricing services and broker quotes, or comparisons to a pricing model. To ensure the proper fair value hierarchy, the Company reviews the third party pricing service’s methodology to understand whether observable or unobservable inputs are being used.

Agency RMBS

The Company’s investments in Agency RMBS consist of pass-through certificates backed by fixed rate, monthly reset adjustable-rate loans (“ARMs”) and hybrid ARMs, the principal and interest of which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Hybrid ARMs have interest rates that have an initial fixed period (typically three, five, seven or ten years) and thereafter reset at regular intervals in a manner similar to ARMs.

Forward Settling Transactions

The Company engages in forward settling transactions to purchase certain securities. The Company records forward settling transactions on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment on the settlement date for the securities purchased. Securities purchased on a forward settling basis are carried at fair value and only begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract. Among other forward settling transactions, the Company from time to time transacts in to-be-announced securities (“TBAs”). As with other forward settling transactions, a seller agrees to issue TBAs at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Company agrees to accept any security that meets specified terms such as issuer, interest rate and terms of underlying mortgages. The Company records TBAs on the trade date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are carried at fair value and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages received may be less favorable than those anticipated by the Company.

As of June 30, 2013 and December 31, 2012, the Company had pledged Agency RMBS with a fair value of $116.4 million and $10.4 million, respectively, on its open forward settling transactions.

Repurchase Agreements

Repurchase agreements are borrowings that are collateralized by the Company’s Agency RMBS and are carried at their amortized cost, which approximates their fair value due to their short term nature, generally 30-90 days. The Company’s repurchase agreement counterparties are large institutional dealers in fixed income securities. Collateral is valued daily and counterparties may require additional collateral when appropriate. Counterparties have the right to sell or repledge collateral pledged for repurchase agreements.

Investment Transactions and Income

The Company records its transactions in securities on a trade date basis. Realized gains and losses on securities transactions are recorded on an identified cost basis. Interest income and expense are recorded on the accrual basis. Interest income on Agency RMBS and Agency Debentures is accrued based on outstanding principal amount of the securities and their contractual terms. Interest on collateralized loan obligations ("CLOs") is accrued at a rate determined based on estimated future cash flows and adjusted prospectively as future cash flow amounts are recast. For CLOs placed on nonaccrual status or when the Company cannot reliably estimate cash flows, the cost recovery method is used. Amortization of premium and accretion of discount are recorded using the yield to maturity method, and are included in investment income in the statements of operations. The Company does not estimate prepayments when calculating the yield to maturity. The amount of premium or discount associated with a prepayment is recorded through investment income on the statements of operations as they occur.

Compensation and Benefits

Included in the Company’s compensation and benefits are salaries, incentive compensation, benefits, share based compensation and the expense relating to restricted stock granted to non-employees (prior to the internalization of the Company's management, which became effective on September 1, 2011). The Company accounts for share based compensation using the fair value based methodology prescribed by ASC 718, Share-Based Payment (“ASC 718”). Compensation cost related to restricted common stock issued is measured at its estimated fair value at the grant date and recognized as expense over the vesting period.

Income Taxes

The Company has elected to be taxed as a REIT and intends to continue to comply with provisions of the Code with respect thereto. As a REIT, the Company generally will not be subject to federal or state income tax on income that it currently distributes to its stockholders. To maintain its qualification as a REIT, the Company must distribute at least 90% of its REIT taxable income to its stockholders and meet certain other tests relating to assets and income.

Earnings Per Share (“EPS”)

Basic EPS is computed using the two class method by dividing net income (loss), after adjusting for the impact of unvested stock awards deemed to be participating securities, by the weighted average number of common shares outstanding calculated excluding unvested stock awards. Diluted EPS is computed by dividing net income (loss), after adjusting for the impact of unvested stock awards deemed to be participating securities, by the weighted average number of common shares outstanding calculated excluding unvested stock awards, giving effect to common stock options and warrants, if they are not anti-dilutive. See Note 3 for EPS computations.

Recent Accounting Pronouncements

In June 2013, the FASB issued ASU 2013-08, Financial Services-Investment Companies (Topic 946). This update modifies the guidance for Topic 946 for determining whether an entity is an investment company for GAAP purposes. It requires entities that adopted Statement of Position 07-1 prior to its deferral to reassess whether they continue to meet the definition of an investment company for GAAP purposes. The guidance is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with retrospective application. Earlier application is prohibited. Management has performed its reassessment and has determined that the Company does not meet the definition of an investment company in accordance with ASC 946 and as a result will need to select and apply other appropriate accounting principles which will change the presentation of the Company's financial statements effective January 1, 2014. Management is still assessing the impact on the Company's financial statements and currently does not expect there will be a material effect on the Company's financial position or results of operations.

In January 2013, the FASB issued ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (Topic 210), Balance Sheet. The update addresses implementation issues about ASU 2011-11 and applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The guidance was effective January 1, 2013 and was applied retrospectively. This guidance does not amend the circumstances in which the Company offsets its derivative positions. As a result, the guidance does not have a material effect on the Company's financial statements.

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(Investments)(Level 3 Inputs) (Details)	12 Months Ended
	Dec. 31, 2012
Derivative, Fair Value, Net [Abstract]
Weighted Average, Constant Prepayment Rate	20.00%
Weighted Average, Default Rate	2.00%
Weighted Average, Recovery Rate	69.00%
Weighted Average, Recovery Lag	6 Months

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(Investments)(Schedule Of Notional Amount And Fair Value Of Derivatives) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Interest Rate Swap [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Dec. 31, 2012 Interest Rate Swap [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Jun. 30, 2013 Interest Rate Swap [Member] Derivatives Not Designated As Hedging Instruments [Member] Liabilities [Member]		Dec. 31, 2012 Interest Rate Swap [Member] Derivatives Not Designated As Hedging Instruments [Member] Liabilities [Member]		Jun. 30, 2013 Interest Rate Swap [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Dec. 31, 2012 Interest Rate Swap [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Jun. 30, 2013 Interest Rate Cap Contracts [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Dec. 31, 2012 Interest Rate Cap Contracts [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Jun. 30, 2013 Interest Rate Cap Contracts [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]		Dec. 31, 2012 Interest Rate Cap Contracts [Member] Derivatives Not Designated As Hedging Instruments [Member] Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount	$ 2,100,000	$ 1,700,000	$ 4,840,000	[1]	$ 1,000,000	[1]	$ 3,750,000	[1]	$ 6,490,000	[1]					$ 4,400,000	[1]	$ 3,400,000	[1]
Derivative Asset, Fair Value, Gross Asset																			288,455	[1]	122,989	[1]
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value							$ (54,242)	[1]	$ (98,575)	[1]	$ 76,612	[1]	$ 1,180	[1]

[1] See Note 2 for additional information on the Company’s purpose for entering into interest rate swaps and caps and the decision not to designate them as hedging instruments.

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Financial Highlights (Details) (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012		Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Financial Highlights [Abstract]
Preferred diviended per common share	$ (0.02)	[1]	$ 0		$ (0.03)	[1]	$ 0
Net income available to common shares	$ (2.30)		$ 0.87		$ (2.40)		$ 1.54
Net asset value, end of period	$ 10.20		$ 13.52		$ 10.20		$ 13.52		$ 12.87	$ 13.31	$ 13.14	$ 13.02
Net Investment Income Per Share	$ 0.36	[1]	$ 0.49	[1]	$ 0.66	[1]	$ 1.00	[1]
Net Gain Loss From Investments And Swap And Cap Contracts Per Share	$ (2.64)	[1]	$ 0.38	[1]	$ (3.03)	[1]	$ 0.54	[1]
Net Income Loss Per Share	$ (2.28)		$ 0.87		$ (2.37)		$ 1.54
Distributions To Shareholders Per Share	$ (0.34)		$ (0.50)		$ (0.66)		$ (1.00)
Issuance Of Common Shares And Amortization Of Share Based Compensation Per Share	$ (0.03)	[1]	$ 0.01	[1]	$ (0.05)	[1]	$ (0.04)	[1]
Net Increase Decrease In Net Asset Value From Capital Transactions Per Share	$ (0.37)		$ (0.49)		$ (0.71)		$ (1.04)
Total Return To Average Net Assets Ratio	(18.10%)	[2]	6.70%	[2]	(18.41%)	[2]	11.52%	[2]
Total Return To Market Value Ratio	(18.65%)	[2]	8.98%	[2]	(16.96%)	[2]	12.55%	[2]
Expenses Before Interest Expense To Average Net Assets Ratio	0.98%	[3]	1.33%	[3]	0.96%	[3]	1.39%	[3]
Total Expenses To Average Net Assets Ratio	3.40%	[3]	3.59%	[3]	3.44%	[3]	3.51%	[3]
Net Investment Income To Average Net Assets Ratio	10.66%	[3]	14.45%	[3]	9.77%	[3]	14.83%	[3]

[1] Calculated based on average shares outstanding during the period. Average shares outstanding include vested and unvested restricted shares and differs from weighted average shares outstanding used in calculating EPS (see Note 3).

[2] Not computed on an annualized basis.

[3] Computed on an annualized basis.

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Condensed Statements Of Assets And Liabilities (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]
Investments in securities, pledged assets	$ 14,696,745	$ 14,831,648
Accrued interest payable, accrued interest on repurchase agreements	3,293	11,717
Series A Cumulative Redeemable Preferred Stock, par value	$ 0.01	$ 0.01
Series A Cumulative Redeemable Preferred Stock, shares authorized	50,000,000	50,000,000
Series A Cumulative Redeemable Preferred Stock, shares issued	3,000,000	3,000,000
Series A Cumulative Redeemable Preferred Stock, shares outstanding	3,000,000	3,000,000
Series A Cumulative Redeemable Preferred Stock, aggregate liquidation value	$ 75,000	$ 75,000
Series A Cumulative Redeemable Preferred Stock, liquidation preference per share	$ 25.00	$ 25.00
Series B Cumulative Redeemable Preferred Stock, liquidation preference per share	$ 25.00	$ 25.00
Series B Cumulative Redeemable Preferred Stock, shares issued	8,000,000	0
Series B Cumulative Redeemable Preferred Stock, shares outstanding	8,000,000	0
Series B Cumulative Redeemable Preferred Stock, aggregate liquidation value	200,000,000	0
Common stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	500,000,000	500,000,000
Common Stock, Shares, Issued	172,780,656	174,924,149
Common Stock, Shares, Outstanding	172,780,656	174,924,149

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Share Capital (Notes)

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

SHARE CAPITAL

The Company has authorized 500,000,000 shares of common stock having par value of $0.01 per share. As of June 30, 2013 and December 31, 2012, the Company had issued and outstanding 172,780,656 and 174,924,149 shares of common stock, respectively. The Company’s common stock transactions during the six months ended June 30, 2013 and 2012 are as follows (in thousands):

	Six Months Ended June 30, 2013					Six Months Ended June 30, 2012
	Shares		Amount			Shares	Amount
Shares sold in public offerings or issued as restricted stock	339		$	1,489		37,745	$	497,813
Shares issued in reinvestment of distributions	—		—			97	1,294
Shares repurchased or canceled	(2,482	)	(26,493		)	—	—
Net increase (decrease)	(2,143	)	$	(25,004	)	37,842	$	499,107

The Company has authorized 50,000,000 shares of preferred stock having a par value of $0.01 per share. As of June 30, 2013 and December 31, 2012, 3,000,000 shares of 7.75% Series A Preferred Stock ($25.00 liquidation preference) were issued and outstanding. As of June 30, 2013, 8,000,000 shares of 7.50% Series B Preferred Stock ($25.00 liquidation preference) were issued and outstanding. The Series A Preferred Stock and Series B Preferred Stock will not be redeemable before August 3, 2017 and April 30, 2018, respectively, except under circumstances where it is necessary to preserve the Company's qualification as a REIT, for federal income tax purposes and the occurrence of a change of control. On or after August 3, 2017 and April 30, 2018, the Company may, at its option, redeem any or all of the shares of the Series A Preferred Stock and Series B Preferred Stock, respectively, at $25.00 per share plus any accumulated and unpaid dividends to, but not including, the respective redemption date. The Series A Preferred Stock and Series B Preferred Stock have no stated maturity and are not subject to any sinking fund or mandatory redemption.

Equity Offerings

On February 1, 2012, the Company closed a public offering of 28,750,000 shares of its common stock at a public offering price of $13.28 per share for total net proceeds of approximately $377.3 million, after the underwriting discount and commissions and expenses.

On July 16, 2012, the Company closed a public offering of 46,000,000 shares of its common stock at a public offering price of $13.70 per share for total net proceeds of approximately $622.2 million, after the underwriting discount and commissions and expenses.

On August 3, 2012, the Company closed a public offering of 3,000,000 shares of its Series A Preferred Stock, liquidation preference of $25.00 per share, for total net proceeds of approximately $72.4 million, after the underwriting discount and commissions and expenses.

On April 30, 2013, the Company closed a public offering of 8,000,000 shares of its Series B Preferred Stock, liquidation preference of $25.00 per share, for total net proceeds of approximately $193.6 million, after the underwriting discount and commissions and expenses.

Dividend Reinvestment and Direct Stock Purchase Plan (“DSPP”)

The Company sponsors a dividend reinvestment and direct stock purchase plan through which stockholders may purchase additional shares of common stock by reinvesting some or all of the cash dividends received on shares of common stock.

Stockholders may also make optional cash purchases of shares of common stock subject to certain limitations detailed in the plan prospectus. For the six months ended June 30, 2013 the Company did not issue any shares under the plan. For the six months ended June 30, 2012, the Company issued 3,020,306 shares under the plan raising approximately $41.1 million of net proceeds. As of June 30, 2013 and December 31, 2012, there were approximately 4.1 million shares available for issuance under the plan.

Restricted Stock Awards

For the six months ended June 30, 2013 and 2012, the Company granted 338,942 and 196,456 shares of restricted stock, respectively, to certain of its directors, officers and employees.

Equity Placement Program (“EPP”)

On June 7, 2011, the Company entered into a sales agreement with JMP Securities LLC whereby the Company may, from time to time, publicly offer and sell up to 15.0 million shares of the Company’s common stock through at-the-market transactions and/or privately negotiated transactions. For the six months ended June 30, 2013, the Company did not issue any shares under the plan. For the six months ended June 30, 2012, the Company issued 5,874,936 shares under the plan raising approximately $79.6 million. As of June 30, 2013 and December 31, 2012, approximately 3.1 million shares of common stock remained available for issuance and sale under the sales agreement.

Share Repurchase Program

On November 15, 2012, the Company announced that its board of directors had authorized the repurchase of shares of the Company’s common stock having an aggregate value of up to $250 million. For the six months ended June 30, 2013, the Company repurchased 2,469,468 shares with a weighted average purchase price of $10.64 or approximately $26.3 million in the aggregate. The Company did not make any repurchases during 2012.

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Condensed Statements Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
INVESTMENT INCOME:
Interest income from Agency RMBS	$ 80,991	$ 70,352	$ 153,092	$ 134,499
Other income	560	1,395	1,560	2,617
Total investment income	81,551	71,747	154,652	137,116
EXPENSES:
Interest	14,047	8,993	29,078	15,846
Compensation and benefits	3,425	3,346	6,745	6,510
General, administrative and other	2,246	1,933	4,479	3,888
Total expenses	19,718	14,272	40,302	26,244
Net investment income	61,833	57,475	114,350	110,872
GAINS AND (LOSSES) FROM INVESTMENTS:
Net realized gain (loss) on investments	(211,418)	61,113	(164,738)	66,286
Net unrealized appreciation (depreciation) on investments	(444,877)	7,473	(570,368)	35,450
Net gain (loss) from investments	(656,295)	68,586	(735,106)	101,736
GAINS AND (LOSSES) FROM SWAP AND CAP CONTRACTS:
Net swap and cap interest income (expense)	(26,699)	(12,687)	(48,655)	(24,193)
Net gain (loss) on termination of swap and cap contracts	7,329	0	15,959	0
Net unrealized appreciation (depreciation) on swap and cap contracts	215,546	(11,669)	238,963	(17,592)
Net gain (loss) from swap and cap contracts	196,176	(24,356)	206,267	(41,785)
Net income (loss)	(398,286)	101,705	(414,489)	170,823
DIVIDENDS ON PREFERRED STOCK	(3,995)	0	(5,448)	0
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$ (402,281)	$ 101,705	$ (419,937)	$ 170,823
NET INCOME (LOSS) PER COMMON SHARE BASIC & DILUTED	$ (2.32)	$ 0.87	$ (2.42)	$ 1.54

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Condensed Statements Of Assets And Liabilities (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
ASSETS:
Investments in securities, at fair value (including pledged assets of $14,696,745 and $14,831,648, respectively)	$ 17,218,204	$ 20,861,718	[1]
Derivative assets, at fair value	365,067	124,169	[1]
Cash and cash equivalents	11,302	13,882	[1]
Receivable for securities sold and principal repayments	4,583,565	10,343	[1]
Interest receivable	44,212	46,558	[1]
Other assets	1,175	826	[1]
Total assets	22,223,525	21,057,496	[1]
LIABILITIES:
Repurchase agreements	13,809,319	13,981,307	[1]
Derivative liabilities, at fair value	54,242	98,575	[1]
Payable for securities purchased	6,126,222	4,515,501	[1]
Payble for cash received as collateral	106,742	28,910	[1]
Distribution payable	62,530	1,243	[1]
Accrued interest payable (including accrued interest on repurchase agreements of $3,293 and $11,717, respectively)	24,810	28,863	[1]
Accrued expenses and other liabilities	3,007	435	[1]
Total liabilities	20,186,872	18,654,834	[1]
Commitments and contingencies (note 6)	0	0	[1]
NET ASSETS	2,036,653	2,402,662	[1]
Net assets consist of:
Series A Cumulative Redeemable Preferred Stock, $0.01 par value, 50,000 shares authorized (3,000 shares issued and outstanding, liquidation preference of $25.00 per share or $75,000 in aggregate)	72,369	72,369	[1]
Series B Cumulative Redeemable Preferred Stock, (8,000 and 0 shares issued and outstanding, respectively, $200,000 in aggregate liquidation preference)	193,550	0	[1]
Common Stock, $0.01 par value, 500,000 shares authorized (172,781 and 174,924 shares issued and outstanding, respectively)	1,728	1,749	[1]
Additional paid in capital	2,212,529	2,237,512	[1]
Retained earnings (accumulated deficit)	$ (443,523)	$ 91,032	[1]
NET ASSET VALUE PER COMMON SHARE	$ 10.20	$ 13.31	[1]

[1] Derived from audited financial statements.

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(Investments)(Schedule Of Fair Value Reconciliation, Level 3) (Details) (Other Investments [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Other Investments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance Level 3 assets	$ 8,495	$ 21,415	$ 19,576	$ 18,675
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements	(1,203)	(2,478)	(6,721)	1,317
Change in net unrealized appreciation (depreciation)	(1,550)	6,928	(12,005)	6,928
Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings	1,291	0	6,419	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	(88)	(1,063)	(324)	(2,118)
Transfers into (out of) Level 3	0	0	0	0
Ending balance Level 3 assets	$ 6,945	$ 24,802	$ 6,945	$ 24,802

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Organization (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Series A Cumulative Redeemable Preferred Stock, liquidation preference per share	$ 25.00	$ 25.00

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Contingencies (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Indemnification claims	$ 0	$ 0

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Share Capital (Details) (USD $)	3 Months Ended	6 Months Ended								6 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2012	Apr. 30, 2013	Dec. 31, 2012		Aug. 03, 2012	Jul. 16, 2012	Feb. 01, 2012	Jun. 30, 2012 Dividend Reinvestment And Direct Stock Purchase Plan [Member]	Jun. 30, 2013 Dividend Reinvestment And Direct Stock Purchase Plan [Member]	Jun. 30, 2013 Equity Placement Program [Member]	Jun. 30, 2012 Equity Placement Program [Member]	Dec. 31, 2012 Equity Placement Program [Member]	Jun. 07, 2011 Equity Placement Program [Member]
Equity Issuance [Line Items]
Common Stock, Shares Authorized	500,000,000	500,000,000			500,000,000
Document Period End Date		Jun. 30, 2013
Stock Repurchased and Retired During Period, Shares	2,469,468
Preferred Stock, Shares Issued	3,000,000	3,000,000			3,000,000		3,000,000
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01			$ 0.01
Series B Cumulative Redeemable Preferred Stock, shares outstanding	8,000,000	8,000,000			0
Series B Cumulative Redeemable Preferred Stock, shares issued	8,000,000	8,000,000		8,000,000	0
Preferred Stock, Dividend Rate, Percentage		7.75%
Stock Repurchased and Retired During Period, Value		$ (26,493,000)	$ 0
Number Of Common Stock Available To Sell Under Sales Agreement												3,081,447		3,081,447	15,000,000
Stock Repurchase Program, Authorized Amount	250,000,000
Public Offering Shares								46,000,000	28,750,000
Common Stock, Shares, Issued	172,780,656	172,780,656			174,924,149
Preferred Stock, Shares Authorized	50,000,000	50,000,000			50,000,000
Net proceeds (payments) from repurchase and issuance of common shares		(26,672,000)	497,709,000									26,300,000
Shares sold in public offerings or issued as restricted stock, Shares		339,000	37,745,000										5,874,936
Stock Issued During Period, Value, Other		1,489,000	497,813,000
Shares sold in public offerings or issued as restricted stock, Amount			79,600,000
Shares issued in reinvestment of distributions, Shares		0	97,000							3,020,306
Treasury Stock Acquired, Average Cost Per Share		$ 10.64
Stock Issued During Period, Shares, Period Increase (Decrease)		(2,143,000)	37,842,000
Increase in net assets from capital transactions		(25,004,000)	499,107,000
Common stock issued under reinvestment plan, value		0	1,294,000							41,100,000
Stock Repurchased During Period, Shares		(2,482,000)	0
Stock Available For Issuance During Period Shares Dividend Reinvestment Plan											4,100,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		338,942	196,456
Public Offering Price								13.70	13.28
Common Stock, Value, Issued	1,728,000	1,728,000			1,749,000	[1]		622,200,000	377,300,000
us-gaap_PreferredStockDividendRatePercentage_SeriesB		7.50%
Series A Cumulative Redeemable Preferred Stock, liquidation preference per share	$ 25.00	$ 25.00			$ 25.00		$ 25.00
Preferred Stock, Value, Issued	72,369,000	72,369,000			72,369,000	[1]	72,400,000
us-gaap_PreferredStockValue_SeriesB	$ 193,550,000	$ 193,550,000		$ 193,600,000	$ 0	[1]

[1] Derived from audited financial statements.

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Contingencies (Notes)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Contingencies

COMMITMENTS AND CONTINGENCIES

The Company enters into certain contracts that contain a variety of indemnifications, principally with broker dealers. As of June 30, 2013 and December 31, 2012, no claims have been asserted under these indemnification agreements. Accordingly, the Company has no liabilities recorded for these agreements as of June 30, 2013 and December 31, 2012.

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(Investments)(Agency RMBS Portfolio) (Details) (USD $)	1 Months Ended			3 Months Ended									3 Months Ended			3 Months Ended					3 Months Ended					3 Months Ended					3 Months Ended
	Jul. 31, 2013	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Agency RMBS [Member]		Dec. 31, 2012 Agency RMBS [Member]		Dec. 31, 2011 Agency RMBS [Member]	Jun. 30, 2013 Agency RMBS [Member] Par Value [Member]	Dec. 31, 2011 Agency RMBS [Member] Par Value [Member]	Jun. 30, 2013 Agency RMBS [Member] Fair Value [Member]	Dec. 31, 2011 Agency RMBS [Member] Fair Value [Member]	Dec. 31, 2012 Agency RMBS [Member] 10 Year Fixed Rate [Member]		Dec. 31, 2011 Agency RMBS [Member] 10 Year Fixed Rate [Member]	Jun. 30, 2013 Agency RMBS [Member] 15 Year Fixed Rate [Member]		Dec. 31, 2012 Agency RMBS [Member] 15 Year Fixed Rate [Member]		Dec. 31, 2011 Agency RMBS [Member] 15 Year Fixed Rate [Member]	Jun. 30, 2013 Agency RMBS [Member] 20 Year Fixed Rate [Member]		Dec. 31, 2012 Agency RMBS [Member] 20 Year Fixed Rate [Member]		Dec. 31, 2011 Agency RMBS [Member] 20 Year Fixed Rate [Member]	Jun. 30, 2013 Agency RMBS [Member] 30 Year Fixed Rate [Member]		Dec. 31, 2012 Agency RMBS [Member] 30 Year Fixed Rate [Member]		Dec. 31, 2011 Agency RMBS [Member] 30 Year Fixed Rate [Member]	Jun. 30, 2013 Agency RMBS [Member] Hybrid ARMs [Member] M		Dec. 31, 2012 Agency RMBS [Member] Hybrid ARMs [Member]		Dec. 31, 2011 Agency RMBS [Member] Hybrid ARMs [Member] M
Investments In Securities And Interest Rate Swap And Cap Contracts [Line Items]
Debt Instrument, Face Amount				$ 16,804,844,000				$ 19,681,502,000							$ 207,091,000	$ 5,582,309,000				$ 11,092,374,000	$ 1,028,057,000				$ 1,087,835,000	$ 7,683,260,000				$ 3,571,692,000	$ 2,511,218,000				$ 3,722,510,000
Assets, Fair Value Disclosure		17,583,271,000	20,985,887,000	17,211,259,000				20,804,143,000							219,747,000	5,773,741,000				11,717,136,000	1,044,339,000				1,148,932,000	7,837,908,000				3,817,488,000	2,555,271,000				3,900,840,000
Weighted Average, Cost/Par									$ 104.32	$ 104.47					$ 103.60	$ 104.51				$ 104.32	$ 104.91				$ 104.96	$ 104.30				$ 105.78	$ 103.74				$ 103.54
Weighted Average, Fair Value/Par											$ 102.42	$ 105.70			$ 106.11	$ 103.43				$ 105.63	$ 101.58				$ 105.62	$ 102.01				$ 106.88	$ 101.75				$ 104.79
Weighted Average, MTR																															74.8	[1]			74.3	[1]
Weighted Average, Coupon				3.27%				3.10%							3.50%	3.17%				3.05%	3.15%				3.17%	3.59%				3.59%	2.59%				2.71%
Weighted Average, CPR	12.00%			13.50%	[2]	15.80%	[2]						19.40%	[2]		15.20%	[2]	16.10%	[2]		7.60%	[2]	10.10%	[2]		7.80%	[2]	8.90%	[2]		17.40%	[2]	19.10%	[2]
Percentage of hybrid ARMs reset to variable rate		100.00%

[1] MTR, or “Months to Reset” is the weighted average number of months remaining before the fixed rate on a hybrid ARM becomes a variable rate. At the end of the fixed period, the variable rate will be determined by the margin and the pre-specified caps of the ARM. After the fixed period, 100% of the hybrid ARMS in the portfolio reset annually.

[2] CPR, or “Constant Prepayment Rate,” is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the constant prepayment rate is an annualized version of the prior three month prepayment rate. Securities with no prepayment history are excluded from this calculation.

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Subsequent Events (Notes)

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

On July 1, 2013, an aggregate of 11,865 shares of restricted common stock were granted to certain directors as a portion of their compensation for serving on the Company’s board of directors.

The CPR of the Company’s Agency RMBS portfolio was approximately 12.0% for the month of July 2013.

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Borrowings (Notes)

6 Months Ended

Jun. 30, 2013

Short-term Debt [Abstract]

Borrowings

BORROWINGS

The Company leverages its Agency RMBS portfolio through the use of repurchase agreements. Each of the borrowing vehicles used by the Company bears interest at floating rates based on a spread above or below the LIBOR. The fair value of borrowings under repurchase agreements approximates their carrying amount due to the short term nature of these financial instruments.

Certain information with respect to the Company’s borrowings is summarized in the following tables. Each of the borrowings listed is contractually due in one year or less (dollars in thousands).

June 30, 2013
Outstanding repurchase agreements	$	13,809,319
Interest accrued thereon	$	3,293
Weighted average borrowing rate	0.39		%
Weighted average remaining maturity (in days)	41.9
Fair value of the collateral(1)	$	14,493,844

December 31, 2012
Outstanding repurchase agreements	$	13,981,307
Interest accrued thereon	$	11,717
Weighted average borrowing rate	0.48		%
Weighted average remaining maturity (in days)	19.6
Fair value of the collateral(1)	$	14,693,645

 __________________

(1) Collateral for repurchase agreements consists of Agency RMBS, U.S. Treasuries and Agency Debentures.

At June 30, 2013 and December 31, 2012, the Company did not have any borrowings under repurchase agreements where the amount at risk with an individual counterparty exceeded 10% of net assets.

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Condensed Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012
Document Period End Date	Jun. 30, 2013
Net income (loss)	$ (414,489)		$ 170,823
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Purchase of investment securities	(27,414,434)		(11,560,000)
Premium paid on interest rate caps	(91,860)		(44,070)
Proceeds from disposition of investment securities	28,608,802		5,730,437
Proceeds from termination of interest rate swap and cap contracts	50,113		0
Proceeds from paydowns of investment securities	1,632,498		1,194,916
Amortization of share based compensation	1,668		1,398
Amortization of premiums and discounts on investment securities	81,542		39,576
Amortization of premiums on interest rate cap contracts	11,438		2,434
Gain (Loss) on Investments, Excluding Other than Temporary Impairments	164,738		(66,286)
Net realized (gain) loss on investments	164,738		(66,286)
Net (gain) loss on termination of swap and cap contracts	(15,959)		0
Net unrealized (appreciation) depreciation on investments	(570,368)		35,450
Unrealized Gain (Loss) on Investments	570,368		(35,450)
Unrealized Gain (Loss) on Investments	(238,963)		17,592
Net unrealized (appreciation) depreciation on swap and cap contracts	238,963		(17,592)
Change in assets and liabilities:
Receivable for securities sold and principal repayments	(4,573,222)		(360,033)
Interest receivable	2,346		(7,657)
Other assets	(349)		(331)
Payable for securities purchased	1,610,721		2,594,998
Payable for cash received as collateral	77,832		0
Accrued interest payable	(4,053)		79
Accrued expenses and other liabilities	2,572		1,773
Net cash provided by (used in) operating activities	61,309		(2,319,801)
Proceeds from repurchase agreements	70,519,523		34,953,941
Repayments of repurchase agreements	(70,691,511)		(33,071,442)
Net proceeds (payments) from repurchase and issuance of common shares	(26,672)		497,709
Net proceeds from issuance of preferred shares	193,550		0
Distributions paid	(58,779)		(58,069)
Net cash provided by (used in) financing activities	(63,889)		2,322,139
Net increase (decrease) in cash and cash equivalents	(2,580)		2,338
CASH AND CASH EQUIVALENTS - Beginning of period	13,882	[1]	11,508
CASH AND CASH EQUIVALENTS - End of period	11,302		13,846
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid	70,236		43,535
SUPPLEMENTAL DISCLOSURES OF NONCASH FLOW INFORMATION:
Distributions declared, not yet paid	$ 62,530		$ 59,465

[1] Derived from audited financial statements.

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Investments In Securities And Interest Rate Swap And Cap Contracts (Investments)(Gain or Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Gain (Loss) on Derivative, Net	$ 196,176	$ (24,356)	$ 206,267	$ (41,785)

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Investments In Securities And Interest Rate Swap And Cap Contracts (Tables)

6 Months Ended

Jun. 30, 2013

Derivative, Fair Value, Net [Abstract]

Assets And Liabilities Measured At Fair Value On A Recurring Basis

The following tables provide a summary of the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

June 30, 2013	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Agency RMBS	$	—	$	17,211,259	$	—	$	17,211,259
Other Investments	—		—		6,945		6,945
Derivative assets	—		365,067		—		365,067
Total	$	—	$	17,576,326	$	6,945	$	17,583,271
Liabilities
Derivative liabilities	$	—	$	54,242	$	—	$	54,242

December 31, 2012	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Agency RMBS	$	—	$	20,804,143	$	—	$	20,804,143
U.S. Treasury Bills	37,999		—		—		37,999
Other Investments	—		—		19,576		19,576
Derivative assets	—		124,169		—		124,169
Total	$	37,999	$	20,928,312	$	19,576	$	20,985,887
Liabilities
Derivative liabilities	$	—	$	98,575	$	—	$	98,575

Summary Of The Weighted Average Inputs To The Models

The weighted average inputs to the models as of December 31, 2012 were:

	Constant  Prepayment Rate		Default Rate		Recovery Rate		Recovery Lag
December 31, 2012	20	%	2	%	69	%	6 Months

Schedule Of Fair Value Reconciliation, Level 3

Level 3 Fair Value Reconciliation

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Other investments	2013			2012			2013			2012
Beginning balance level 3 assets	$	8,495		$	21,415		$	19,576		$	18,675
Cash payments recorded as a reduction of cost basis	(88		)	(1,063		)	(324		)	(2,118		)
Change in net unrealized appreciation (depreciation)	(1,203		)	(2,478		)	(6,721		)	1,317
Net purchases (sales)	(1,550		)	6,928			(12,005		)	6,928
Net gain (loss) on sales	1,291			—			6,419			—
Transfers into (out of) level 3	—			—			—			—
Ending balance level 3 assets	$	6,945		$	24,802		$	6,945		$	24,802

Agency RMBS Portfolio

The Agency RMBS portfolio consisted of Agency RMBS as follows:

June 30, 2013	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
15 Year Fixed Rate	$	5,582,309	$	5,773,741	$	104.51	$	103.43	N/A	3.17	%	15.2	%
20 Year Fixed Rate	1,028,057		1,044,339		104.91		101.58		N/A	3.15	%	7.6	%
30 Year Fixed Rate	7,683,260		7,837,908		104.30		102.01		N/A	3.59	%	7.8	%
Hybrid ARMs	2,511,218		2,555,271		103.74		101.75		74.8	2.59	%	17.4	%
Total/Weighted Average	$	16,804,844	$	17,211,259	$	104.32	$	102.42		3.27	%	13.5	%

December 31, 2012	Par Value		Fair Value		Weighted Average
Asset Type	(in thousands)				Cost/Par		Fair Value/Par		MTR(1)	Coupon		CPR(2)
10 Year Fixed Rate	$	207,091	$	219,747	$	103.60	$	106.11	N/A	3.50	%	19.4	%
15 Year Fixed Rate	11,092,374		11,717,136		104.32		105.63		N/A	3.05	%	16.1	%
20 Year Fixed Rate	1,087,835		1,148,932		104.96		105.62		N/A	3.17	%	10.1	%
30 Year Fixed Rate	3,571,692		3,817,488		105.78		106.88		N/A	3.59	%	8.9	%
Hybrid ARMs	3,722,510		3,900,840		103.54		104.79		74.3	2.71	%	19.1	%
Total/Weighted Average	$	19,681,502	$	20,804,143	$	104.47	$	105.70		3.10	%	15.8	%

__________________

⁽¹⁾  MTR, or “Months to Reset” is the weighted average number of months remaining before the fixed rate on a hybrid ARM becomes a variable rate. At the end of the fixed period, the variable rate will be determined by the margin and the pre-specified caps of the ARM. After the fixed period, 100% of the hybrid ARMS in the portfolio reset annually.

⁽²⁾  CPR, or “Constant Prepayment Rate,” is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the constant prepayment rate is an annualized version of the prior three month prepayment rate. Securities with no prepayment history are excluded from this calculation.

Summary Of Interest Rate Swap And Cap Contracts

In order to mitigate its interest rate exposure, the Company enters into interest rate swap and cap contracts. The Company had the following activity in interest rate swap and cap transactions during the three and six months endedJune 30, 2013 and 2012 (in thousands):

Three and Six Months Ended June 30, 2013					Three and Six Months Ended June 30, 2012
Trade Date	Transaction	Notional			Trade Date	Transaction	Notional
February 2013	Opened	$	1,500,000		April 2012	Opened	$	500,000
March 2013	Terminated	(500,000		)	May 2012	Opened	600,000
March 2013	Opened	1,200,000			June 2012	Opened	600,000
April 2013	Opened	500,000			Net Increase		$	1,700,000
May 2013	Opened	500,000
May 2013	Matured	(100,000		)
June 2013	Terminated	(700,000		)
June 2013	Matured	(300,000		)
Net Increase		$	2,100,000

As of June 30, 2013 and December 31, 2012, the Company had pledged Agency RMBS and U.S Treasury securities with a fair value of $86.5 million and $127.6 million, respectively, as collateral on interest rate swap and cap contracts. The Company had Agency RMBS and U.S. Treasuries of $209.1 million and cash of $106.7 million pledged to it as collateral for its interest rate swap and cap contracts as of June 30, 2013. In addition, the Company had Agency RMBS and U.S. Treasuries of $18.4 million and cash of $28.9 million pledged to it as collateral for its interest rate cap contracts as of December 31, 2012.

Schedule Of Notional Amount And Fair Value Of Derivatives

Below is a summary of our interest rate swap and cap contracts open as of June 30, 2013 and December 31, 2012 and the net gain and loss on swap and cap contracts for the three and six months ended June 30, 2013 and 2012 (in thousands):

Derivatives not designated as hedging instruments under ASC 815(a)
Interest Rate Swap Contracts	Notional Amount		Fair Value			Statement of Assets and Liabilities Location
June 30, 2013	$	4,840,000	$	(54,242	)	Derivative liabilities, at fair value
June 30, 2013	3,750,000		76,612			Derivative assets, at fair value
December 31, 2012	6,490,000		(98,575		)	Derivative liabilities, at fair value
December 31, 2012	1,000,000		1,180			Derivative assets, at fair value
Interest Rate Cap Contracts	Notional Amount		Fair Value			Statement of Assets and Liabilities Location
June 30, 2013	$	4,400,000	$	288,455		Derivative assets, at fair value
December 31, 2012	3,400,000		122,989			Derivative assets, at fair value

		Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments Under ASC 815(a)	Location of Gain or (Loss) Recognized in Income on Derivative	Three Months Ended June 30,					Six Months Ended June 30,
		2013		2012			2013		2012
Interest rate swap and cap contracts	Net gain (loss) from swap and cap contracts	$	196,176	$	(24,356	)	$	206,267	$	(41,785	)

__________________

(a) See Note 2 for additional information on the Company’s purpose for entering into interest rate swaps and caps and the decision not to designate them as hedging instruments.

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Financial Highlights (Notes)

6 Months Ended

Jun. 30, 2013

Financial Highlights [Abstract]

Financial Highlights

FINANCIAL HIGHLIGHTS

In accordance with financial reporting requirements applicable to investment companies, the Company has included below certain financial highlight information for the three and six months ended June 30, 2013 and 2012:

	Per Common Share
	Three Months Ended June 30,								Six Months Ended June 30,
	2013				2012				2013				2012
Net asset value, beginning of period	$	12.87			$	13.14			$	13.31			$	13.02
Net income (loss):
Net investment income	0.36			(a)	0.49			(a)	0.66			(a)	1.00			(a)
Net gain (loss) from investments and swap and cap contracts	(2.64		)	(a)	0.38			(a)	(3.03		)	(a)	0.54			(a)
Net income (loss)	(2.28		)		0.87				(2.37		)		1.54
Dividends on preferred stock	(0.02		)	(a)	—				(0.03		)	(a)	—
Net income (loss) available to common shares	(2.30		)		0.87				(2.40		)		1.54
Capital transactions:
Distributions to common stockholders	(0.34		)		(0.50		)		(0.66		)		(1.00		)
Issuance/Repurchase of common and preferred shares and amortization of share based compensation	(0.03		)	(a)	0.01			(a)	(0.05		)	(a)	(0.04		)	(a)
Net decrease in net asset value from capital transactions	(0.37		)		(0.49		)		(0.71		)		(1.04		)
Net asset value, end of period	$	10.20			$	13.52			$	10.20			$	13.52
Net asset value total return (%)	(18.10		)%	(b)	6.70		%	(b)	(18.41		)%	(b)	11.52		%	(b)
Market value total return (%)	(18.65		)%	(b)	8.98		%	(b)	(16.96		)%	(b)	12.55		%	(b)
Ratios to Average Net Assets
Expenses before interest expense	0.98		%	(c)	1.33		%	(c)	0.96		%	(c)	1.39		%	(c)
Total expenses	3.40		%	(c)	3.59		%	(c)	3.44		%	(c)	3.51		%	(c)
Net investment income	10.66		%	(c)	14.45		%	(c)	9.77		%	(c)	14.83		%	(c)

 __________________

(a) Calculated based on average shares outstanding during the period. Average shares outstanding include vested and unvested restricted shares and differs from weighted average shares outstanding used in calculating EPS (see Note 3).

(b) Not computed on an annualized basis.

(c) Computed on an annualized basis.

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Financial Highlights (Tables)

6 Months Ended

Jun. 30, 2013

Financial Highlights [Abstract]

Summary Of Financial Highlight Information

In accordance with financial reporting requirements applicable to investment companies, the Company has included below certain financial highlight information for the three and six months ended June 30, 2013 and 2012:

	Per Common Share
	Three Months Ended June 30,								Six Months Ended June 30,
	2013				2012				2013				2012
Net asset value, beginning of period	$	12.87			$	13.14			$	13.31			$	13.02
Net income (loss):
Net investment income	0.36			(a)	0.49			(a)	0.66			(a)	1.00			(a)
Net gain (loss) from investments and swap and cap contracts	(2.64		)	(a)	0.38			(a)	(3.03		)	(a)	0.54			(a)
Net income (loss)	(2.28		)		0.87				(2.37		)		1.54
Dividends on preferred stock	(0.02		)	(a)	—				(0.03		)	(a)	—
Net income (loss) available to common shares	(2.30		)		0.87				(2.40		)		1.54
Capital transactions:
Distributions to common stockholders	(0.34		)		(0.50		)		(0.66		)		(1.00		)
Issuance/Repurchase of common and preferred shares and amortization of share based compensation	(0.03		)	(a)	0.01			(a)	(0.05		)	(a)	(0.04		)	(a)
Net decrease in net asset value from capital transactions	(0.37		)		(0.49		)		(0.71		)		(1.04		)
Net asset value, end of period	$	10.20			$	13.52			$	10.20			$	13.52
Net asset value total return (%)	(18.10		)%	(b)	6.70		%	(b)	(18.41		)%	(b)	11.52		%	(b)
Market value total return (%)	(18.65		)%	(b)	8.98		%	(b)	(16.96		)%	(b)	12.55		%	(b)
Ratios to Average Net Assets
Expenses before interest expense	0.98		%	(c)	1.33		%	(c)	0.96		%	(c)	1.39		%	(c)
Total expenses	3.40		%	(c)	3.59		%	(c)	3.44		%	(c)	3.51		%	(c)
Net investment income	10.66		%	(c)	14.45		%	(c)	9.77		%	(c)	14.83		%	(c)

 __________________

(a) Calculated based on average shares outstanding during the period. Average shares outstanding include vested and unvested restricted shares and differs from weighted average shares outstanding used in calculating EPS (see Note 3).

(b) Not computed on an annualized basis.

(c) Computed on an annualized basis.

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2013

Short-term Debt [Abstract]

Schedule Of Company's Borrowings

Certain information with respect to the Company’s borrowings is summarized in the following tables. Each of the borrowings listed is contractually due in one year or less (dollars in thousands).

June 30, 2013
Outstanding repurchase agreements	$	13,809,319
Interest accrued thereon	$	3,293
Weighted average borrowing rate	0.39		%
Weighted average remaining maturity (in days)	41.9
Fair value of the collateral(1)	$	14,493,844

December 31, 2012
Outstanding repurchase agreements	$	13,981,307
Interest accrued thereon	$	11,717
Weighted average borrowing rate	0.48		%
Weighted average remaining maturity (in days)	19.6
Fair value of the collateral(1)	$	14,693,645

 __________________

(1) Collateral for repurchase agreements consists of Agency RMBS, U.S. Treasuries and Agency Debentures.

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Document And Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 19, 2013
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013
Entity Registrant Name	CYS Investments, Inc.
Entity Central Index Key	0001396446
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		172,792,521

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Share Capital (Tables)

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Common Stock Transactions [Table Text Block]

The Company’s common stock transactions during the six months ended June 30, 2013 and 2012 are as follows (in thousands):

	Six Months Ended June 30, 2013					Six Months Ended June 30, 2012
	Shares		Amount			Shares	Amount
Shares sold in public offerings or issued as restricted stock	339		$	1,489		37,745	$	497,813
Shares issued in reinvestment of distributions	—		—			97	1,294
Shares repurchased or canceled	(2,482	)	(26,493		)	—	—
Net increase (decrease)	(2,143	)	$	(25,004	)	37,842	$	499,107