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DERIVATIVE INSTRUMENTS (Tables)
 6 Months Ended
Jun. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summarizes Fair Value Information about Derivative Assets Liabilities
The table below summarizes fair value information about our derivative assets and liabilities at June 30, 2020 and December 31, 2019:
Derivatives Instruments
 
June 30, 2020
 
December 31, 2019
Assets
 
(dollars in thousands)
Interest rate swaps
 
$
—

 
$
1,199

Interest rate swaptions
 
41,668

 
11,580

TBA derivatives
 
123,974

 
15,181

Futures contracts
 
—

 
77,889

Purchase commitments
 
—

 
2,050

Credit derivatives (1)
 
—

 
5,657

 
 
$
165,642

 
$
113,556

Liabilities
 
 
 
 
Interest rate swaps
 
$
1,198,970

 
$
706,862

TBA derivatives
 
5,778

 
11,316

Futures contracts
 
17,579

 
84,781

Purchase commitments
 
—

 
907

Credit derivatives (1)
 
34,711

 
—

 
 
$
1,257,038

 
$
803,866

 
(1) 
The notional amount of the credit derivatives in which the Company purchased protection was $0.0 and $10.0 million at June 30, 2020 and December 31, 2019, respectively. The maximum potential amount of future payments is the notional amount of credit derivatives in which the Company sold protection of $495.0 million and $345.0 million at June 30, 2020 and December 31, 2019, respectively, plus any coupon shortfalls on the underlying tranche. The credit derivative tranches referencing the basket of bonds had a range of ratings between AAA and BBB-.
Summary of Certain Characteristics of Derivatives
The following table summarizes certain characteristics of the Company’s interest rate swaps at June 30, 2020 and December 31, 2019:
 
June 30, 2020
Maturity
Current Notional (1)(2)
 
Weighted Average Pay Rate
 
Weighted Average Receive Rate
 
Weighted Average Years to Maturity (3)
(dollars in thousands)
0 - 3 years
$
15,469,400

 
0.20
%
 
0.42
%
 
2.37
3 - 6 years
6,215,450

 
0.73
%
 
0.15
%
 
4.09
6 - 10 years
5,456,500

 
1.51
%
 
1.18
%
 
8.22
Greater than 10 years
1,709,000

 
3.16
%
 
0.57
%
 
19.60
Total / Weighted average
$
28,850,350

 
1.01
%
 
0.75
%
 
4.87
 
 
 
 
 
 
 
 
 
December 31, 2019
Maturity
Current Notional (1)(2)
 
Weighted Average
Pay Rate
 
Weighted Average Receive Rate
 
Weighted Average Years to Maturity
(dollars in thousands)
0 - 3 years
$
38,942,400

 
1.60
%
 
1.84
%
 
1.29
3 - 6 years
16,097,450

 
1.77
%
 
1.87
%
 
4.30
6 - 10 years
16,176,500

 
2.20
%
 
2.02
%
 
9.00
Greater than 10 years
2,930,000

 
3.76
%
 
1.86
%
 
17.88
Total / Weighted average
$
74,146,350

 
1.84
%
 
1.89
%
 
4.23
 

(1)
As of June 30, 2020, 17%, 80% and 3% of the Company’s interest rate swaps were linked to LIBOR, the Federal funds rate and the Secured Overnight Financing Rate, respectively. As of December 31, 2019, 75% and 25% of the Company’s interest rate swaps were linked to LIBOR and the overnight index swap rate, respectively.
(2)
There were no forward starting swaps at June 30, 2020 and December 31, 2019.
(3)
As of June 30, 2020, the weighted average years to maturity of payer interest rate swaps is offset by the weighted average years to maturity of receiver interest rate swaps. As such, the net weighted average years to maturity for each maturity bucket may fall outside of the range listed.


The following table presents swaptions outstanding at June 30, 2020 and December 31, 2019.
June 30, 2020
 
 
Current Underlying Notional
 
Weighted Average Underlying Fixed Rate
 
Weighted Average Underlying Floating Rate
 
Weighted Average Underlying Years to Maturity
 
Weighted Average Months to Expiration
(dollars in thousands)
Long pay
 
$4,625,000
 
1.60%
 
3M LIBOR
 
10.45
 
6.60
Long receive
 
$250,000
 
1.66%
 
3M LIBOR
 
10.53
 
6.27
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
Current Underlying Notional
 
Weighted Average Underlying Fixed Rate
 
Weighted Average Underlying Floating Rate
 
Weighted Average Underlying Years to Maturity
 
Weighted Average Months to Expiration
(dollars in thousands)
Long pay
 
$4,675,000
 
2.53%
 
3M LIBOR
 
9.22
 
4.66
Long receive
 
$2,000,000
 
1.49%
 
3M LIBOR
 
10.29
 
3.40

The following table summarizes certain characteristics of the Company’s TBA derivatives at June 30, 2020 and December 31, 2019:
June 30, 2020
Purchase and sale contracts for derivative TBAs
Notional
 
Implied Cost Basis
 
Implied Market Value
 
Net Carrying Value
(dollars in thousands)
Purchase contracts
$
18,381,000

 
$
19,030,505

 
$
19,148,701

 
$
118,196

Net TBA derivatives
$
18,381,000

 
$
19,030,505

 
$
19,148,701

 
$
118,196

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
Purchase and sale contracts for derivative TBAs
Notional
 
Implied Cost Basis
 
Implied Market Value
 
Net Carrying Value
(dollars in thousands)
Purchase contracts
$
10,043,000

 
$
10,182,891

 
$
10,192,038

 
$
9,147

Sale contracts
(3,144,000
)
 
(3,294,486
)
 
(3,299,768
)
 
(5,282
)
Net TBA derivatives
$
6,899,000

 
$
6,888,405

 
$
6,892,270

 
$
3,865

 
 
 
 
 
 
 
 

The following table summarizes certain characteristics of the Company’s futures derivatives at June 30, 2020 and December 31, 2019:
 
June 30, 2020
 
Notional - Long
Positions
 
Notional - Short
Positions
 
Weighted Average
Years to Maturity
 
(dollars in thousands)
 
 
 
 
U.S. Treasury futures - 10 year and greater
$
—

 
$
(1,847,800
)
 
6.87
Total
$
—

 
$
(1,847,800
)
 
6.87
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
Notional - Long
Positions
 
Notional - Short
Positions
 
Weighted Average
Years to Maturity
 
(dollars in thousands)
 
 
 
 
U.S. Treasury futures - 2 year
$
—

 
$
(180,000
)
 
1.96
U.S. Treasury futures - 5 year
—

 
(2,953,300
)
 
4.42
U.S. Treasury futures - 10 year and greater
2,600,000

 
(5,806,400
)
 
9.74
Total
$
2,600,000

 
$
(8,939,700
)
 
8.26
 
Offsetting of Derivative Assets and Liabilities
The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset on our Consolidated Statements of Financial Condition at June 30, 2020 and December 31, 2019, respectively.
June 30, 2020
 
 
 
Amounts Eligible for Offset
 
 
 
Gross Amounts
 
Financial Instruments
 
Cash Collateral
 
Net Amounts
Assets
(dollars in thousands)
Interest rate swaptions, at fair value
$
41,668

 
$
—

 
$
—

 
$
41,668

TBA derivatives, at fair value
123,974

 
(4,848
)
 
—

 
119,126

Liabilities
 
Interest rate swaps, at fair value
$
1,198,970

 
$
—

 
$
(124,301
)
 
$
1,074,669

TBA derivatives, at fair value
5,778

 
(4,848
)
 
—

 
930

Futures contracts, at fair value
17,579

 
—

 
(17,579
)
 
—

Credit derivatives
34,711

 
—

 
(34,711
)
 
—

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
Amounts Eligible for Offset
 
 
 
Gross Amounts
 
Financial Instruments
 
Cash Collateral
 
Net Amounts
Assets
(dollars in thousands)
Interest rate swaps, at fair value
$
1,199

 
$
(951
)
 
$
—

 
$
248

Interest rate swaptions, at fair value
11,580

 
—

 
—

 
11,580

TBA derivatives, at fair value
15,181

 
(5,018
)
 
—

 
10,163

Futures contracts, at fair value
77,889

 
(10,902
)
 
—

 
66,987

Purchase commitments
2,050

 
—

 
—

 
2,050

Credit derivatives
5,657

 
—

 
—

 
5,657

Liabilities
 
Interest rate swaps, at fair value
$
706,862

 
$
(951
)
 
$
(104,205
)
 
$
601,706

TBA derivatives, at fair value
11,316

 
(5,018
)
 
—

 
6,298

Futures contracts, at fair value
84,781

 
(10,902
)
 
(73,879
)
 
—

Purchase commitments
907

 
—

 
—

 
907
Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss
The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:
 
Location on Consolidated Statements of Comprehensive Income (Loss)
 
Net Interest Component of Interest Rate Swaps
 
Realized Gains (Losses) on Termination of Interest Rate Swaps
 
Unrealized Gains (Losses) on Interest Rate Swaps
For the three months ended
(dollars in thousands)
June 30, 2020
$
(64,561
)
 
$
(1,521,732
)
 
$
1,494,628

June 30, 2019
$
83,653

 
$
(167,491
)
 
$
(1,276,019
)
For the six months ended
 
June 30, 2020
$
(78,541
)
 
$
(1,919,293
)
 
$
(1,333,095
)
June 30, 2019
$
217,688

 
$
(755,747
)
 
$
(1,666,575
)

The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:
Three Months Ended June 30, 2020
Derivative Instruments
Realized Gain (Loss)
 
Unrealized Gain (Loss)
 
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives
$
250,525

 
$
(46,363
)
 
$
204,162

Net interest rate swaptions
(29,880
)
 
(22,634
)
 
(52,514
)
Futures
246

 
(17,579
)
 
(17,333
)
Purchase commitments
—

 
9,666

 
9,666

Credit derivatives
1,203

 
25,732

 
26,935

Total
 
 
 
 
$
170,916

 
 
 
 
 
 
 
Three Months Ended June 30, 2019
Derivative Instruments
Realized Gain (Loss)
 
Unrealized Gain (Loss)
 
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives
$
174,221

 
$
(68,291
)
 
$
105,930

Net interest rate swaptions
(11,317
)
 
(7,178
)
 
(18,495
)
Futures
(514,441
)
 
(82,779
)
 
(597,220
)
Purchase commitments
—

 
1,106

 
1,106

Credit derivatives
1,199

 
1,069

 
2,268

Total
 
 
 
 
$
(506,411
)
 
Six Months Ended June 30, 2020
Derivative Instruments
Realized Gain (Loss)
 
Unrealized Gain (Loss)
 
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives
$
521,610

 
$
114,331

 
$
635,941

Net interest rate swaptions
21,566

 
47,499

 
69,065

Futures
(279,230
)
 
(10,687
)
 
(289,917
)
Purchase commitments
—

 
(1,143
)
 
(1,143
)
Credit derivatives
3,128

 
(39,732
)
 
(36,604
)
Total
 
 
 
 
$
377,342

 
Six Months Ended June 30, 2019
Derivative Instruments
Realized Gain (Loss)
 
Unrealized Gain (Loss)
 
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives
$
387,946

 
$
(108,231
)
 
$
279,715

Net interest rate swaptions
(41,309
)
 
12,506

 
(28,803
)
Futures
(1,006,182
)
 
119,533

 
(886,649
)
Purchase commitments
—

 
2,251

 
2,251

Credit derivatives
3,501

 
8,415

 
11,916

Total
 
 
 
 
$
(621,570
)