REIT Analyst
REITs, research analyst, bonds, long/short equity

American Capital Agency Corp. - Book Value Resilience In The Face Of Rates Back-Up

Treasury yields and mortgage rates have backed up massively over the past few weeks. Mortgage-backed securities (MBS) prices have fallen, some by 5 or 6 points. And agency mortgage REITs have been killed, the implicit logic being that leverage of 7 or 8 times on something falling like a rock can't be good. American Capital Agency Corp. (NASDAQ:AGNC), in that respect, is the poster child of the entire mortgage REIT market.

Many investors and analysts have followed this simple logic, (leverage x MBS price drop) modulo some fudge factor, in order to estimate book value losses on mREITs. Analyzing the drivers of agency mortgage REIT value (MBS, TBAs, specifieds, repos, swaps, swaptions, caps, floors, etc.) is complicated --...

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