I am going to turn over to Bill who will give you the detail.
So with this page we try to illustrate for you how we allocate our equity, how we look at the various returns within the residential mortgage-backed securities sector. So the first column is agency MBS, which probably more of you are familiar with than the non-agency. There you see our debt-to-equity ratio is 6.87 times, which is probably similar to some of the mortgage REITs you may be familiar with. What I would like to point out again within the agency column is that the yield on our assets is 3.15% and we’ve achieved that without any 30-year fixed rate. So this is with hybrids, 75% hybrids, 25% 15-year generating a yield in excess of 3%. That’s a good thing.
Our cost of funds is high and that’s because we are more mature mortgage REIT, we put on swaps five years ago, which are running off this year in the main, and that cost of funds, 1.71 is expected to trend down this year. The spread of 144 is probably in the low side but it’s not because of the asset yield, it’s because of the cost of funds and we expect that cost of funds to trend down this year.
Next column is the non-agencies. There you see the debt-to-equity is 1.8 times and this is why we are very excited about the non-agency sector. The yield, the loss adjusted yield before any leverage is 6.9%. So 6.9% yielding asset with what we believe are conservative loss assumptions makes it a very attractive asset to us. Cost of funds is 2.16% and the spread is 4.76%. So hopefully these numbers speak to you as to why we are very interested in this sector.
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