Dynex Capital is a mortgage REIT that invests primarily in Agency mortgage-backed securities — residential MBS (RMBS) and commercial MBS (CMBS) — guaranteed by U.S. government-sponsored enterprises like Fannie Mae and Freddie Mac. Because these securities carry GSE guarantees, Dynex takes essentially no credit risk; its core risk is interest rate exposure. Dynex's business model is a leveraged carry trade: the company borrows short-term via repurchase agreements (repo), typically at SOFR plus 15–20 bps, and invests in longer-duration Agency MBS that yield more, capturing the spread. Dynex typically runs 7–8x leverage and uses interest rate swaps and Treasury futures to hedge the duration mismatch between its long-lived assets and short-term repo financing. Dynex also uses TBA forward contracts, rolling positions monthly to earn "drop income" rather than taking physical delivery of securities. Beyond carry income, Dynex generates returns from MBS spread tightening — which boosts book value — and from security selection, targeting specified pools with favorable prepayment profiles to protect yield. Dynex is internally managed with just 28 employees, keeping G&A lean and creating operating leverage as equity grows. The company pursues an active at-the-market equity issuance program, issuing shares only at a premium to book value, and raised over $1B in 2025, nearly tripling its equity market cap to ~$3B. Dynex must distribute at least 90% of REIT taxable income and pays a monthly dividend.