What happened

After a decline right after the opening bell, the share price of AGNC Investment (AGNC 0.06%) surged higher Tuesday. The price fell 4.2% shortly after the market opened but then jumped as high as 4.7% after 1 p.m. ET. At 1:40 p.m. ET, the stock price was up 3.2% to $7.86 per share. Year to date, AGNC is down roughly 47%.

The major stock market indexes were also up Tuesday, with the Russell 2000 small-cap index leading the way, up 2.6% at 3 p.m. ET.

So what

The market reacted to AGNC Investment, a mortgage real estate investment trust (REIT), after it posted third-quarter earnings after market close on Monday. AGNC posted a $1.31 net loss, down from a $0.87 net loss last quarter and a $0.35 net gain in the third quarter of 2021.

However, AGNC beat analysts estimates with a $0.84 net spread and dollar roll income per common share -- a non-GAAP metric that the company uses to measure income. This includes $0.23 per common share of dollar roll income associated with its $20.3 billion average net long position in agency mortgage-backed securities in the "to-be-announced" (TBA) market. (TBA relates to the selling of mortgage-backed securities, where the details are not known until later. Dollar roll income is the price differential between the TBA price for current month settlement versus the TBA price for forward month settlement.)

The $0.84 net spread and dollar roll income per common share was up from $0.83 last quarter and $0.75 in the third quarter of 2021. The consensus analyst estimate was $0.60 per share.

AGNC CFO Bernice Bell said the improved $0.84 net spread and dollar roll income per share is due to its asset repositioning and significant hedge position.

Now what

This is a difficult housing market, with interest rates rising, housing prices still high, and mortgage applications and refinancings down. But president and CEO Peter Federico sees a light at the end of the tunnel.

Federico said in a press release:

As we have noted in prior quarters, wider spreads, while negative for our book value in the short run, also provide correspondingly higher projected returns on a go-forward basis for our portfolio. At current valuation levels, Agency MBS are as attractive as they have been in AGNC's nearly 15-year history. So, as difficult as this year has been, it is important not to lose sight of the unique opportunity that we believe is on the other side of this significant repricing event.

Also, AGNC declared a $0.12 per month dividend for July, August, and September at an 18.90% yield. It remains a great dividend stock, but be cautious through this difficult market with rates still rising.