Solid Cash Flows: Fed Tightening

Interest Rate View - Narrower Range More time between 2-3% • Increasing global debt starting in the 1980's was and continues to be a driver of global growth, but it also fueled the 2008 financial crisis. Governments and central banks prevented a complete collapse of the financial system by deploying extraordinary measures. Since then the global debt burden has risen exponentially. • Due to increased global debt levels, we believe it is very difficult for central banks to raise interest rates or tighten financial conditions for long periods of time without negatively impacting the level and pace of growth. This acts as a governor for how high interest rates can ultimately rise. • On the other hand, increasing supply of debt acts as a governor for how low interest rates can go in the absence of a crisis. Global governments have used expansionary fiscal policies funded with debt to stabilize their economies and to manage the demographic shifts from aging populations, disinflationary impacts of technology, and human impacts from shifting cross-border labor utilization. Furthermore lower interest rates have encouraged corporations to borrow more. ● Human conflict is a consequence that governments must contend with and contributes to uncertainty in the global economic environment. • Given all these factors, we believe the 10 year Treasury yield will spend substantial amounts of time between 2-3%. DYNEX CAPITAL INC. 9

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