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CYS Investments' CEO Presents At Barclays Capital Global Financial Services Conference (Transcript )

The capacity is very good right now in the repo markets, but it does move around. And all of our counterparties have all their own issues, and we like to diversify our sources of financing and types of financing. And, of course, we’re a REIT, so whatever we earn we’ve got to pay out, and it goes out to you all in the form of dividends to our shareholders.

We’re now three years plus as a public company, and we’re very proud of the track record thus far. And we hope to continue to deliver these results. Essentially, since our IPO we’ve just about doubled our initial public investors’ investments, since that June 2009 IPO.

On the expense ratio side, I actually said in the IPO roadshow that our goal was to become the most efficient provider of access to these markets, to our investors. And by these markets I mean the agency mortgage market, the repo market, which is very difficult for you to access yourself, and the interest rate derivatives, basically the hedging markets, the swaps markets.

So if we’re the most efficient provider of access to these markets than anyone else, then we will always be able to generate a better return. And when returns were in the 15%, 16%, 17% neighborhood, the investor base really didn’t focus on expense ratio.

But now we’re in a low teens investment environment, and I think the market is beginning to realize that this expense ratio load and efficiency and quality of management really is a pretty significant differentiator, and we think this really matters to our shareholders and ultimately, obviously, the multiple on the stock.

So let’s move to the mortgage investing environment. Rates are low. The Fed is our biggest competitor for assets, in a very significant way. And the Fed’s activities in the markets and the expectations of more activity in the market is driving the absolute level of rates. A 7/1 hybrid ARM, par priced - this is very theoretical - would yield about 1.4% right now. There really is no such thing. The entire market is a premium market.

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