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CYS Investments, Inc. Announces Second Quarter 2013 Financial Results

Stocks in this article: CYS

CYS Investments, Inc. (NYSE: CYS) (“CYS” or the “Company”) today announced financial results for the quarter ended June 30, 2013.

Second Quarter 2013 Summary Results

  • June 30, 2013 net asset value per common share of $10.20 after declaring a $0.34 dividend per common share on June 10, 2013.
  • June 30, 2013 leverage ratio of 7.5 to 1.
  • GAAP net loss available to common shares of $402.3 million, or $2.32 per diluted common share. The main contributors were:
    • Net realized loss from investments of $211.4 million.
    • Net unrealized depreciation on investments of $444.9 million.
    • Net unrealized appreciation on swap and cap contracts of $215.5 million.
  • Core Earnings plus Drop Income of $63.4 million, or $0.37 per diluted common share ($0.18 Core Earnings and $0.19 Drop Income).
  • Operating expenses of 0.98% of average net assets.
  • Interest rate spread net of hedge including drop income of 1.36%.
  • Weighted average amortized cost of Agency RMBS of $104.32.

Second Quarter 2013 Agency RMBS Market Summary

In the second quarter of 2013, Agency RMBS markets reacted to a series of communications made by the U.S. Federal Reserve (the “Fed”) regarding the timing of tapering its bond purchases known as "quantitative easing" or "QE3". As the perceived likelihood of QE3 tapering increased, Agency RMBS markets reacted, resulting in markedly lower prices. The following table illustrates 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


Yield Day of Release

May 22, 2013 Minutes of the Federal Open Market Committee ("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 this time, rates on U.S. Treasuries and swaps also increased however, not in the same order of magnitude as Agency RMBS yields. This caused 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 to June 30, 2013, the yield on a Fannie Mae 30 Year 3.5% increased 61 basis points to 3.14%, while the rate on a 4 year interest rate swap increased only 47 basis points to 1.20%.

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