33 during the fourth quarter of 2018 , we saw credit spreads and spreads on agency mbs widened coupled with interest rate volatility . we were prepared for the move in interest rates as we actively limited our duration gap . our net `` duration gap `` on agency rmbs , agency cmbs , which is a measure of the risk due to mismatches that can occur between the interest rate sensitivity of our assets and liabilities , inclusive of hedges , was a negative 0.25 years as of december 31 , 2018. although there was a modest benefit from declining interest rates , the spread widening on our agency cmbs portfolio overshadowed this benefit resulting in a negative economic return ( the change in book value plus dividends ) for the fourth quarter of 3.3 % , and a decline in our book value of 6.1 % . we believed the agency rmbs sector was at risk for further spread widening in the longer term due to the federal reserve 's balance sheet normalization plan . in response , during the fourth quarter , we continued to reduce our agency rmbs portfolio and redeploy the proceeds into credit sensitive investments such as residential whole loans , residential bridge loans and commercial loans . the combination of overall higher interest rates coupled with higher costs associated with financing our credit sensitive investments , increased our average effective borrowing costs , excluding the consolidated vies , by 47 basis points , to 2.65 % for the year ended december 31 , 2018 from 2.18 % as of december 31 , 2017. our average effective borrowing costs , includes the cost of our repurchase agreements and the net interest paid or received on our interest rate swap hedges . our manager 's 2019 outlook is for u.s. growth and inflation to moderate and central bank policy normalization to slow to a crawl . our manager believes trade policy poses substantial risks , global growth has downshifted but should remain steady , emerging markets , though volatile , should outperform and spread products should recover relative to u.s. treasuries . with the federal reserve taking a more dovish stance signaling that there will be fewer rate hikes than originally forecasted or possibly none , our manager 's view is there will be no rate hikes in 2019. with our current view that interest rates will be range-bound , we continue to operate with significant interest rate risk protection for our interest rate positions . this interest rate protection is intended to minimize the impact of the increase in long-term rates on our portfolio and mitigate interest rate risk to changes in short-term funding costs . the degree of interest rate protection and the duration gap will vary over time given market conditions and our manager 's outlook . against this backdrop , the fundamentals in the u.s. housing market remain strong and spreads for most mortgages remained supported . credit sensitive mortgage sectors have performed relatively well and are expected to continue to offer attractive returns . critical accounting policies the consolidated financial statements include our accounts , those of our consolidated wholly-owned trs and certain variable interest entities ( “ vies ” ) in which we are the primary beneficiary . all intercompany amounts have been eliminated in consolidation . in accordance with gaap , our consolidated financial statements require the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties . in accordance with sec guidance , the following discussion addresses the accounting policies that we currently apply . our most critical accounting policies will involve decisions and assessments that could affect our reported assets and liabilities , as well as our reported revenues and expenses . we believe that all of the decisions and assessments upon which our consolidated financial statements have been based were reasonable at the time made and based upon information available to us at that time . for a review of recent accounting pronouncements that may impact our results of operations , refer note 2 - “ summary of significant accounting policies ” contained in this annual report on form 10-k. valuation of financial instruments we disclose the fair value of our financial instruments according to a fair value hierarchy ( levels i , ii , and iii , as defined below ) . asc 820 `` fair value measurements and disclosures `` establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements . asc 820 further specifies a hierarchy of valuation techniques , which is based on whether the inputs into the valuation technique are observable or unobservable . the hierarchy is as follows : level i — quoted prices in active markets for identical assets or liabilities . level ii — quoted prices for similar assets and liabilities in active markets ; quoted prices for identical or similar instruments in markets that are not active ; and model-derived valuations whose inputs are observable or whose significant value drivers are observable . 34 level iii — prices are determined using significant unobservable inputs . in situations where quoted prices or observable inputs are unavailable , for example , when there is little or no market activity for an investment at the end of the period , unobservable inputs may be used . the level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety . transfers between levels are determined by us at the end of the reporting period . mortgage-backed securities and other securities our mortgage-backed securities and other securities portfolio primarily consists of agency rmbs , non-agency rmbs , agency cmbs , non-agency cmbs , abs and other real estate related assets . story_separator_special_tag to assess whether we have the power to direct the activities of a vie that most significantly impact the vie 's economic performance , we consider all facts and circumstances , including our role in establishing the vie and our ongoing rights and responsibilities . this assessment includes first , identifying the activities that most significantly impact the vie 's economic performance ; and second , identifying which party , if any , has power over those activities . in general , the parties that make the most significant decisions affecting the vie or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a vie . to assess whether we have the obligation to absorb losses of the vie or the right to receive benefits from the vie that could potentially be significant to the vie , we consider all of our economic interests . this assessment requires that we apply judgment in determining whether these interests , in the aggregate , are considered potentially significant to the vie . factors considered in assessing significance include : the design of the vie , including its capitalization structure ; subordination of interests ; payment priority ; relative share of interests held across various classes within the vie 's capital structure ; and the reasons why the interests are held by us . in instances where the company and its related parties have variable interests in a vie , we consider whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed . if one party within the related party group meets both these criteria , such reporting entity is the primary beneficiary of the vie and no further analysis is needed . if no party within the related party group on its own meets both the power and losses or benefits criteria , but the related party group as a whole meets these two criteria , the determination of primary beneficiary within the related party group requires significant judgment . the analysis is based upon qualitative as well as quantitative factors , such as the relationship of the vie to each of the members of the related-party group , as well as the significance of the vie 's activities to those members , with the objective of determining which party is most closely associated with the vie . ongoing assessments of whether an enterprise is the primary beneficiary of a vie is required . derivatives and hedging activities subject to maintaining our qualification as a reit for u.s. federal income tax purposes , as part of our hedging strategy , we may enter into interest rate swaps , including forward starting swaps , interest rate swaptions , u.s. treasury options , futures contracts , tbas , agency and non-agency interest only strips total return swaps , credit default swaps and foreign current swaps and forwards . derivatives , subject to reit requirements , are used for hedging purposes rather than speculation . we determine the fair value of our derivative positions and obtain quotations from third parties , including the chicago mercantile exchange or cme , to facilitate the process of determining such fair values . if our hedging activities do not achieve the desired results , reported earnings may be adversely affected . gaap requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value . the accounting for changes in the fair value of derivatives depends on the intended use of the derivative . the fair value adjustment will affect either other comprehensive income in stockholders ' equity until the hedged item is recognized in earnings or net income depending on whether the derivative instrument is designated and qualifies as a for hedge for accounting purposes and if so , the nature of the hedging activity . we have elected not to apply hedge accounting for our derivative instruments . accordingly , we record the change in fair value of our derivative instruments , which includes net interest rate swap payments/receipts ( including accrued amounts ) and net currency payments/receipts ( including accrued amounts ) related to interest rate swaps and currency swaps , respectively in `` gain ( loss ) on derivative instruments , net `` in our consolidated statements of operations . 38 in january 2017 , the cme amended its rulebooks to legally characterize variation margin payments and receipts for over-the-counter derivatives they clear as settlements of the derivatives ' exposure rather than collateral against exposure . as a result of the change in legal characterization , effective january 1 , 2017 , variation margin is no longer classified as collateral in the consolidated balance sheets in either `` due from counterparties `` or `` due to counterparties `` , but rather a component of the respective `` derivative asset , at fair value `` or `` derivative liability , at fair value `` in the consolidated balance sheets . the variation margin is now considered partial settlements of the derivative contract and will result in realized gains or losses which prior to january 1 , 2017 were classified as unrealized gains or losses on derivatives . prior to the cme rulebook change variation margin was included in financing activities in our consolidated statement of cash flows in either `` due from counterparties , net `` or `` due to counterparties , net `` . commencing in january 2017 , cash postings for variation margin are included in operating activities in the consolidated statements of cash flows . proceeds and payments on settlement of swaptions , mortgage put options , futures contracts credit default swaps and tbas are included in cash flows from investing activities . proceeds and payments on settlement of forward contracts are reflected in cash flows from financing activities

securitized debt we acquired a variable interest in cmsc trust and retl trust and were required to consolidate the cmbs vies . refer to note 7 - `` financings '' for details . at december 31 , 2018 , the consolidated cmsc trust 's commercial mortgage pass-through certificate , which bears a fixed interest rate of 8.9 % and matures on july 6 , 2020 , had an outstanding balance of $ 10.8 million and a fair value of $ 10.8 million . the following table summarizes the consolidated retl trust 's commercial mortgage pass-through certificates at december 31 , 2018 which is classified in `` securitized debt '' in the consolidated balance sheets ( dollars in thousands ) : replace_table_token_15_th ( 1 ) class x-cp and class x-ext are interest-only classes with a notional balance of $ 91.4 million each . 45 the following table presents our average repurchase agreement borrowings , excluding unamortized debt issuance costs , by type of collateral pledged for the years ended december 31 , 2018 and december 31 , 2017 ( dollars in thousands ) : replace_table_token_16_th ( 1 ) amount represents the maximum borrowings at month-end during each of the respective periods . hedging activity in connection with our risk management activities , we enter into a variety of derivative and non-derivative instruments . our primary objective for acquiring these derivatives and non-derivative instruments is to mitigate our exposure to future events that are outside our control . our derivative instruments are designed to mitigate the effects market risk and cash flow volatility associated with interest rate risk , including associated prepayment risk .


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```securitized debt we acquired a variable interest in cmsc trust and retl trust and were required to consolidate the cmbs vies . refer to note 7 - `` financings '' for details . at december 31 , 2018 , the consolidated cmsc trust 's commercial mortgage pass-through certificate , which bears a fixed interest rate of 8.9 % and matures on july 6 , 2020 , had an outstanding balance of $ 10.8 million and a fair value of $ 10.8 million . the following table summarizes the consolidated retl trust 's commercial mortgage pass-through certificates at december 31 , 2018 which is classified in `` securitized debt '' in the consolidated balance sheets ( dollars in thousands ) : replace_table_token_15_th ( 1 ) class x-cp and class x-ext are interest-only classes with a notional balance of $ 91.4 million each . 45 the following table presents our average repurchase agreement borrowings , excluding unamortized debt issuance costs , by type of collateral pledged for the years ended december 31 , 2018 and december 31 , 2017 ( dollars in thousands ) : replace_table_token_16_th ( 1 ) amount represents the maximum borrowings at month-end during each of the respective periods . hedging activity in connection with our risk management activities , we enter into a variety of derivative and non-derivative instruments . our primary objective for acquiring these derivatives and non-derivative instruments is to mitigate our exposure to future events that are outside our control . our derivative instruments are designed to mitigate the effects market risk and cash flow volatility associated with interest rate risk , including associated prepayment risk .
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 Suspicious Activity Report : 33 during the fourth quarter of 2018 , we saw credit spreads and spreads on agency mbs widened coupled with interest rate volatility . we were prepared for the move in interest rates as we actively limited our duration gap . our net `` duration gap `` on agency rmbs , agency cmbs , which is a measure of the risk due to mismatches that can occur between the interest rate sensitivity of our assets and liabilities , inclusive of hedges , was a negative 0.25 years as of december 31 , 2018. although there was a modest benefit from declining interest rates , the spread widening on our agency cmbs portfolio overshadowed this benefit resulting in a negative economic return ( the change in book value plus dividends ) for the fourth quarter of 3.3 % , and a decline in our book value of 6.1 % . we believed the agency rmbs sector was at risk for further spread widening in the longer term due to the federal reserve 's balance sheet normalization plan . in response , during the fourth quarter , we continued to reduce our agency rmbs portfolio and redeploy the proceeds into credit sensitive investments such as residential whole loans , residential bridge loans and commercial loans . the combination of overall higher interest rates coupled with higher costs associated with financing our credit sensitive investments , increased our average effective borrowing costs , excluding the consolidated vies , by 47 basis points , to 2.65 % for the year ended december 31 , 2018 from 2.18 % as of december 31 , 2017. our average effective borrowing costs , includes the cost of our repurchase agreements and the net interest paid or received on our interest rate swap hedges . our manager 's 2019 outlook is for u.s. growth and inflation to moderate and central bank policy normalization to slow to a crawl . our manager believes trade policy poses substantial risks , global growth has downshifted but should remain steady , emerging markets , though volatile , should outperform and spread products should recover relative to u.s. treasuries . with the federal reserve taking a more dovish stance signaling that there will be fewer rate hikes than originally forecasted or possibly none , our manager 's view is there will be no rate hikes in 2019. with our current view that interest rates will be range-bound , we continue to operate with significant interest rate risk protection for our interest rate positions . this interest rate protection is intended to minimize the impact of the increase in long-term rates on our portfolio and mitigate interest rate risk to changes in short-term funding costs . the degree of interest rate protection and the duration gap will vary over time given market conditions and our manager 's outlook . against this backdrop , the fundamentals in the u.s. housing market remain strong and spreads for most mortgages remained supported . credit sensitive mortgage sectors have performed relatively well and are expected to continue to offer attractive returns . critical accounting policies the consolidated financial statements include our accounts , those of our consolidated wholly-owned trs and certain variable interest entities ( “ vies ” ) in which we are the primary beneficiary . all intercompany amounts have been eliminated in consolidation . in accordance with gaap , our consolidated financial statements require the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties . in accordance with sec guidance , the following discussion addresses the accounting policies that we currently apply . our most critical accounting policies will involve decisions and assessments that could affect our reported assets and liabilities , as well as our reported revenues and expenses . we believe that all of the decisions and assessments upon which our consolidated financial statements have been based were reasonable at the time made and based upon information available to us at that time . for a review of recent accounting pronouncements that may impact our results of operations , refer note 2 - “ summary of significant accounting policies ” contained in this annual report on form 10-k. valuation of financial instruments we disclose the fair value of our financial instruments according to a fair value hierarchy ( levels i , ii , and iii , as defined below ) . asc 820 `` fair value measurements and disclosures `` establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements . asc 820 further specifies a hierarchy of valuation techniques , which is based on whether the inputs into the valuation technique are observable or unobservable . the hierarchy is as follows : level i — quoted prices in active markets for identical assets or liabilities . level ii — quoted prices for similar assets and liabilities in active markets ; quoted prices for identical or similar instruments in markets that are not active ; and model-derived valuations whose inputs are observable or whose significant value drivers are observable . 34 level iii — prices are determined using significant unobservable inputs . in situations where quoted prices or observable inputs are unavailable , for example , when there is little or no market activity for an investment at the end of the period , unobservable inputs may be used . the level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety . transfers between levels are determined by us at the end of the reporting period . mortgage-backed securities and other securities our mortgage-backed securities and other securities portfolio primarily consists of agency rmbs , non-agency rmbs , agency cmbs , non-agency cmbs , abs and other real estate related assets . story_separator_special_tag to assess whether we have the power to direct the activities of a vie that most significantly impact the vie 's economic performance , we consider all facts and circumstances , including our role in establishing the vie and our ongoing rights and responsibilities . this assessment includes first , identifying the activities that most significantly impact the vie 's economic performance ; and second , identifying which party , if any , has power over those activities . in general , the parties that make the most significant decisions affecting the vie or have the right to unilaterally remove those decision makers is deemed to have the power to direct the activities of a vie . to assess whether we have the obligation to absorb losses of the vie or the right to receive benefits from the vie that could potentially be significant to the vie , we consider all of our economic interests . this assessment requires that we apply judgment in determining whether these interests , in the aggregate , are considered potentially significant to the vie . factors considered in assessing significance include : the design of the vie , including its capitalization structure ; subordination of interests ; payment priority ; relative share of interests held across various classes within the vie 's capital structure ; and the reasons why the interests are held by us . in instances where the company and its related parties have variable interests in a vie , we consider whether there is a single party in the related party group that meets both the power and losses or benefits criteria on its own as though no related party relationship existed . if one party within the related party group meets both these criteria , such reporting entity is the primary beneficiary of the vie and no further analysis is needed . if no party within the related party group on its own meets both the power and losses or benefits criteria , but the related party group as a whole meets these two criteria , the determination of primary beneficiary within the related party group requires significant judgment . the analysis is based upon qualitative as well as quantitative factors , such as the relationship of the vie to each of the members of the related-party group , as well as the significance of the vie 's activities to those members , with the objective of determining which party is most closely associated with the vie . ongoing assessments of whether an enterprise is the primary beneficiary of a vie is required . derivatives and hedging activities subject to maintaining our qualification as a reit for u.s. federal income tax purposes , as part of our hedging strategy , we may enter into interest rate swaps , including forward starting swaps , interest rate swaptions , u.s. treasury options , futures contracts , tbas , agency and non-agency interest only strips total return swaps , credit default swaps and foreign current swaps and forwards . derivatives , subject to reit requirements , are used for hedging purposes rather than speculation . we determine the fair value of our derivative positions and obtain quotations from third parties , including the chicago mercantile exchange or cme , to facilitate the process of determining such fair values . if our hedging activities do not achieve the desired results , reported earnings may be adversely affected . gaap requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value . the accounting for changes in the fair value of derivatives depends on the intended use of the derivative . the fair value adjustment will affect either other comprehensive income in stockholders ' equity until the hedged item is recognized in earnings or net income depending on whether the derivative instrument is designated and qualifies as a for hedge for accounting purposes and if so , the nature of the hedging activity . we have elected not to apply hedge accounting for our derivative instruments . accordingly , we record the change in fair value of our derivative instruments , which includes net interest rate swap payments/receipts ( including accrued amounts ) and net currency payments/receipts ( including accrued amounts ) related to interest rate swaps and currency swaps , respectively in `` gain ( loss ) on derivative instruments , net `` in our consolidated statements of operations . 38 in january 2017 , the cme amended its rulebooks to legally characterize variation margin payments and receipts for over-the-counter derivatives they clear as settlements of the derivatives ' exposure rather than collateral against exposure . as a result of the change in legal characterization , effective january 1 , 2017 , variation margin is no longer classified as collateral in the consolidated balance sheets in either `` due from counterparties `` or `` due to counterparties `` , but rather a component of the respective `` derivative asset , at fair value `` or `` derivative liability , at fair value `` in the consolidated balance sheets . the variation margin is now considered partial settlements of the derivative contract and will result in realized gains or losses which prior to january 1 , 2017 were classified as unrealized gains or losses on derivatives . prior to the cme rulebook change variation margin was included in financing activities in our consolidated statement of cash flows in either `` due from counterparties , net `` or `` due to counterparties , net `` . commencing in january 2017 , cash postings for variation margin are included in operating activities in the consolidated statements of cash flows . proceeds and payments on settlement of swaptions , mortgage put options , futures contracts credit default swaps and tbas are included in cash flows from investing activities . proceeds and payments on settlement of forward contracts are reflected in cash flows from financing activities

