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DERIVATIVE INSTRUMENTS (Tables)
 9 Months Ended
Sep. 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 September 30, 2020 and December 31, 2019:
Derivatives InstrumentsSeptember 30, 2020December 31, 2019
Assets(dollars in thousands)
Interest rate swaps$— $1,199 
Interest rate swaptions63,601 11,580 
TBA derivatives38,656 15,181 
Futures contracts550 77,889 
Purchase commitments438 2,050 
Credit derivatives (1)
— 5,657 
Total derivative assets$103,245 $113,556 
Liabilities 
Interest rate swaps$1,126,179 $706,862 
TBA derivatives21,140 11,316 
Futures contracts7,792 84,781 
Purchase commitments488 907 
Credit derivatives (1)
27,082 — 
Total derivative liabilities$1,182,681 $803,866 
    
(1) The notional amount of the credit derivatives in which the Company purchased protection was $0.0 and $10.0 million at September 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 $499.0 million and $345.0 million at September 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 September 30, 2020 and December 31, 2019:
 
September 30, 2020
Maturity
Current Notional (1)(2)
Weighted Average Pay RateWeighted Average Receive Rate
Weighted Average Years to Maturity (3)
(dollars in thousands)
0 - 3 years
$17,816,700 0.14 %0.41 %2.27
3 - 6 years
7,255,000 0.69 %0.09 %3.87
6 - 10 years
5,806,500 1.43 %0.65 %8.09
Greater than 10 years
1,349,000 2.90 %0.39 %21.85
Total / Weighted average$32,227,200 0.91 %0.48 %4.51
December 31, 2019
Maturity
Current Notional (1)(2)
Weighted Average
Pay Rate		Weighted Average Receive RateWeighted 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 September 30, 2020, 12%, 77% and 11% 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)     As of September 30, 2020, notional amount includes $655.0 million of a forward starting pay fixed swap on October 1, 2020. There were no forward starting swaps at December 31, 2019.
(3)     As of September 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 September 30, 2020 and December 31, 2019.
September 30, 2020
Current Underlying NotionalWeighted Average Underlying Fixed RateWeighted Average Underlying Floating RateWeighted Average Underlying Years to MaturityWeighted Average Months to Expiration
(dollars in thousands)
Long pay$6,550,0001.29%3M LIBOR10.607.97
Long receive$250,0001.66%3M LIBOR10.273.20
December 31, 2019
Current Underlying NotionalWeighted Average Underlying Fixed RateWeighted Average Underlying Floating RateWeighted Average Underlying Years to MaturityWeighted Average Months to Expiration
(dollars in thousands)
Long pay$4,675,0002.53%3M LIBOR9.224.66
Long receive$2,000,0001.49%3M LIBOR10.293.40
The following table summarizes certain characteristics of the Company’s TBA derivatives at September 30, 2020 and December 31, 2019:
September 30, 2020
Purchase and sale contracts for derivative TBAsNotionalImplied Cost BasisImplied Market ValueNet Carrying Value
(dollars in thousands)
Purchase contracts$20,394,000 $21,176,883 $21,194,446 $17,563 
Sale contracts(100,000)(104,844)(104,891)(47)
Net TBA derivatives$20,294,000 $21,072,039 $21,089,555 $17,516 
December 31, 2019
Purchase and sale contracts for derivative TBAsNotionalImplied Cost BasisImplied Market ValueNet 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 September 30, 2020 and December 31, 2019:
 
September 30, 2020
 Notional - Long
Positions		Notional - Short
Positions		Weighted Average
Years to Maturity
 (dollars in thousands)
U.S. Treasury futures - 10 year and greater
$— $(2,822,800)6.90
Total$— $(2,822,800)6.90
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 September 30, 2020 and December 31, 2019, respectively.
September 30, 2020
 Amounts Eligible for Offset 
 Gross AmountsFinancial InstrumentsCash CollateralNet Amounts
Assets(dollars in thousands)
Interest rate swaptions, at fair value$63,601 $— $— $63,601 
TBA derivatives, at fair value38,656 (18,950)— 19,706 
Futures contracts, at fair value550 (550)— — 
Purchase commitments438 — — 438 
Liabilities 
Interest rate swaps, at fair value$1,126,179 $— $(117,947)$1,008,232 
TBA derivatives, at fair value21,140 (18,950)— 2,190 
Futures contracts, at fair value7,792 (550)(7,242)— 
Purchase commitments488 — — 488 
Credit derivatives27,082 — (27,082)— 
December 31, 2019
 Amounts Eligible for Offset 
 Gross AmountsFinancial InstrumentsCash CollateralNet Amounts
Assets(dollars in thousands)
Interest rate swaps, at fair value$1,199 $(951)$— $248 
Interest rate swaptions, at fair value11,580 — — 11,580 
TBA derivatives, at fair value15,181 (5,018)— 10,163 
Futures contracts, at fair value77,889 (10,902)— 66,987 
Purchase commitments2,050 — — 2,050 
Credit derivatives5,657 — — 5,657 
Liabilities 
Interest rate swaps, at fair value$706,862 $(951)$(104,205)$601,706 
TBA derivatives, at fair value11,316 (5,018)— 6,298 
Futures contracts, at fair value84,781 (10,902)(73,879)— 
Purchase commitments907 — — 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 SwapsRealized Gains (Losses) on Termination of Interest Rate SwapsUnrealized Gains (Losses) on Interest Rate Swaps
For the three months ended(dollars in thousands)
September 30, 2020$(62,529)$(427)$170,327 
September 30, 2019$88,466 $(682,602)$(326,309)
For the nine months ended
September 30, 2020$(141,070)$(1,919,720)$(1,162,768)
September 30, 2019$306,154 $(1,438,349)$(1,992,884)
The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:
Three Months Ended September 30, 2020
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$276,849 $(100,680)$176,169 
Net interest rate swaptions(9,836)3,263 (6,573)
Futures(19,989)10,337 (9,652)
Purchase commitments— (51)(51)
Credit derivatives1,531 7,892 9,423 
Total
$169,316 
 
Three Months Ended September 30, 2019
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$93,919 $(46,124)$47,795 
Net interest rate swaptions(2,778)(4,571)(7,349)
Futures(424,268)364,613 (59,655)
Purchase commitments— (348)(348)
Credit derivatives1,784 885 2,669 
Total$(16,888)
Nine Months Ended September 30, 2020
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$798,459 $13,651 $812,110 
Net interest rate swaptions11,730 50,762 62,492 
Futures(299,220)(350)(299,570)
Purchase commitments— (1,194)(1,194)
Credit derivatives4,659 (31,839)(27,180)
Total$546,658 
Nine Months Ended September 30, 2019
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$481,865 $(154,355)$327,510 
Net interest rate swaptions(44,088)7,935 (36,153)
Futures(1,430,450)484,146 (946,304)
Purchase commitments— 1,903 1,903 
Credit derivatives5,285 9,301 14,586 
Total$(638,458)