ANNALY CAPITAL MANAGEMENT INC

Real gross domestic product (“GDP”) growth was 2.1% on a seasonally adjusted annualized rate (“SAAR”) basis in the first quarter of 2026 (“Q1 2026”), with consumption contributing 0.5% SAAR, private investment 7.9% SAAR, and government spending 0.5% SAAR, while net trade subtracted 1.3 percentage points from growth; real final sales to domestic purchasers rose 1.7% SAAR. Consumption is expected to have rebounded in the second quarter, tracking 1.5% SAAR quarter-to-date, while private investment is expected to remain robust given capital expenditures related to the AI buildout.

Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditures (“PCE”) Price Index, remained elevated. Headline PCE prices rose 0.45% month-over-month and 4.1% year-over-year in May, while core PCE, which excludes volatile food and energy prices, rose 0.32% month-over-month and 3.4% year-over-year. June Consumer Price Index (“CPI”) data came in much better than expected, driven by a notable decline in energy prices (-5.7% month-over-month), soft core commodity prices (-0.1% month-over-month), and a slowdown in core services inflation (0.0% month-over-month); as a result, headline CPI declined 42 bps month-over-month to 3.5% year-over-year, and core CPI declined 2 bps month-over-month to 2.6% year-over-year.

The labor market showed improving momentum during the quarter. According to the Bureau of Labor Statistics, non-farm payrolls rose by 57,000 in June, bringing net job creation to 334,000 for the second quarter, compared with 218,000 in the first quarter and 116,000 for all of 2025. The unemployment rate stood at 4.2%, its lowest monthly reading since June 2025, while the labor force participation rate fell to 61.5% for the quarter, its lowest level since early 2021. Wage growth, as measured by the year-over-year change in Average Hourly Earnings, was 3.5%.

U.S. interest rates repriced sharply in Q2 2026 as inflation forecasts shifted meaningfully higher. Treasury yields rose across the yield curve, led by the front end (2-year yields up 38 bps), as Fed pricing flipped from cuts to hikes, resulting in a flatter yield curve (2s10s down 23 bps during the quarter). Market-based measures of short-term inflation expectations increased meaningfully alongside higher energy prices, and long-end yields reached year-to-date peaks. Rate volatility, however, fell over the quarter.

The following table presents interest rates and spreads at each date presented: