Smriti Popenoe: Yes. That, so we’re seeing marginal returns in the 165 area over seven-years. And we’re, kind of, thinking of those returns in the 15 to 18 ROE level just depending on how much we use for hedge costs with respect to options or something else or 15 on the lower side, maybe 18 on the higher side if you end up not hedging as much of the optionality.
Bose George: Okay, great. Thanks a lot.
Operator: Next we’ll go to Matthew Erdner with Jones Trading. Your line is now open.
Matthew Erdner: Hey, guys. Thanks for taking the question. Could you talk a little bit about the ATM issuance during the quarter when that happened? And then I guess what would target you guys to hit the ATM market again?
Smriti Popenoe: Yes. I think that — thank you, Matt. That was earlier in the quarter, and we’ve talked a lot about our capital issuance and just our overall goals with respect to capital. In general, you know, and I’ve said this publicly on calls many times. We think about ATM issuance when the cost of issuing all-in is cheaper than the investment opportunity, the return on investment. So as long as that’s the case, we believe we’re making an accretive decision for our shareholders. Now lots of things factor into that, the price to book, dilution, is that all of that is factored in. But just philosophically, we are in a historic investment opportunity, and it’s a — it’s an environment where we think our shareholders will benefit tremendously from having capital invested in this environment, and therefore, it becomes an environment in which we should raise capital.
So just philosophically, that’s kind of how we look at it. The timing and, you know, of what we — when and how we actually do it. Obviously, we’re looking to minimize the cost and really do the most accretive issuance that we can, right? So that’s been our framework. I mean, we look at all the metrics that everybody else looks at. We look at price to book. We look at dilution. We look at the marginal cost of capital, all of that. And this quarter, obviously, it wasn’t accretive for us to do that. Now we do have investment opportunities we preferred at this point to take up leverage and then be very disciplined about the capital allocation to when it’s cheaper for us to issue and if that ever does come about, then, you know, and it’s accretive for us to do that, we’ll do that.
Matthew Erdner: Awesome. Thank you.
Smriti Popenoe: You’re welcome.
Operator: [Operator Instructions] Next we’ll go to Eric Hagen with BTIG. Your line is open.
Eric Hagen: Hey, thanks. Good morning. Maybe just a quick follow-up on leverage. I mean, how are you guys thinking about the amount of leverage you’re using in light of the fact that the yield curve is inverted even though spreads are wide and relatively attractive? Like do you feel like you could support more leverage if the Fed takes rates even higher? And then conversely, is there more leverage that you could maybe look to take out or put on if the curve becomes more positively sloped?
Smriti Popenoe: Sure. Thanks, Eric. Yes, look so the curve being inverted, there’s two interesting aspects for that. As long as the yield curve is inverted, you’re going to want to use hedges to generate return. And by using hedges, you’re effectively taking some of that inversion out of your P&L, it’s not all of it depending on the type of hedge you choose, okay? So the curve being inverted and the Fed taking rates up higher, to the extent the curve remains inverted, I think those will be — we’re somewhat in different to that. So what really matters is what is the hedge return on mortgages in even in an inverted yield curve. And by the way, if the Fed does take rates up further, you are probably going to see an adjustment to mortgage spreads at that point as well.
