real-time news and commentary for investors
Wednesday, Oct 30
Hatteras management notes improving trends early in Q4
- The yield curve has priced in the taper, says Hatteras (HTS -3.3%) management on the earnings call. The only way out for the Fed (if it goes through with the taper) is to leave short rates lower for longer - thus a steeper yield curve and making Hatteras' laddered ARM book strategy as the place to be.
- ARM spread tightening already began in September, but has really picked up since the quarter ended. Along with prepayments - which have declined sharply since the end of September - it sets up for a Q4 with maybe more favorable results than Q3.
- On the move to stop using hedge accounting for interest rate swaps and other derivatives, management regrets losing the reporting simplicity it allowed. On the other hand, hedge accounting makes hedging a bit more difficult, particularly as the company begins using new products such as eurodollar futures.
- Off 7.5% earlier, HTS is trying to mount a minor comeback as the call progresses.
- Last night: Q3 results.