Investment opportunities certainly exist in residential mortgage backed securities particularly in the Non-Agency sector. Agency MBS investment returns continue to benefit from the steep yield curve and despite government [elections] refinancing rates are not spiked.
In this period of economic uncertainty our goal remains to generate double-digit returns on equity with an appropriate level of leverage. Again, I think you’ll find that we have been a very disciplined company and that we’ll continue to be so. Slide I’m very proud of, we’ve had as 14.5% annual returns since January of 2000 and you can see as we’ve depicted here MFA relative to the S&P 500 financials and the S&P 500.
Having said that, as introduction, I’m going to turn it over to Bill Gorin, who is the President of the company.
William S. GorinThanks Stewart. So, while Stewart mentioned our focus is residential mortgage backed securities. We allocate our equity and assets over Agency and both Non-agency. So, the first column is an agency model, which some of you are familiar with, deleverage, debt to equity ratio is 6.7 times. So, not different than any companies you’ve seen. The yields in our agency assets as of the third quarter, in the third quarter was 3.37%, which again in line with other companies. Although, we achieved that without owning any 30-year fixed rates. So, we’re very happy with the yield on our Agency portfolio. Our cost of funds in our Agency portfolio is 1.74% and we’re not very happy with that. That reflects the fact that we invested in prior time periods when interest rates were a lot higher. And the good news is we expect this cost of funds to go down because many of our high cost swaps will be running off over the next 12 months. But the spread on agencies was 1.63% which is high for us on a historic basis and, spread we’re happy with.