Chimera Investment (NYSE:CIM) is a mortgage REIT that invests primarily in non-agency residential mortgages that are not insured against loss by US Government agencies like Fannie Mae or Freddie Mac. Because they are uninsured, returns are driven by credit risk rather than interest rate risk. Chimera maintains a levered Agency mortgage portfolio for regulatory purposes; its non-Agency portfolio carries minimal leverage and is the primary driver of investment returns. CIM has sold off since Mid-May along with other mortgage REITS relating to interest rate fears and bond market disruptions, yet the economics of its underlying collateral continue to improve. Reward-to-risk has substantially improved at the current price, given the sustained performance of the collateral underlying the mortgage portfolio...
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