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More sell-side on the mREITS (MORT): Maxim keeps a Buy with $33 PT on AGNC expecting the annual...

More sell-side on the mREITS (MORT): Maxim keeps a Buy with $33 PT on AGNC expecting the annual dividend to be maintained at $5/share thanks to $1.08 of undistributed taxable income in the kitty (KBW agrees). Jefferies is cautious, calling AGNC's Q1 tale an example of how even a well-run mREIT can run afoul. "Price and extension risk inherent in agency MBS (NLY, HTS, CYS, CMO, ANH, ARR, WMC) today are risks most investors underestimate."
Comments (10)
  • Have to disagree with Jefferies. The losses suffered by AGNC were unique to them because of their use of TBA's and holdings of specified and HAMP mortgages. Annaly navigated the same interest rate environment without such losses.
    6 May 2013, 10:03 AM Reply Like
  • Annaly saw BV drop 4% QoQ, when they reported. Certainly not as steep of a drop as AGNC, but declines in BV were not unique to AGNC
    6 May 2013, 11:09 AM Reply Like
  • Let's see NLY's BV after adding CXS ending Q2
    6 May 2013, 11:37 AM Reply Like
  • Dunno how relevant the point about the BV drop. NLY's BV drop didn't savage it's earnings. . .
    6 May 2013, 11:04 PM Reply Like
  • Paper losses dont matter if you are holding the bond til maturity, and spread income was in line with the previous quarter.
    6 May 2013, 11:20 PM Reply Like
  • @ Mike: You seemed to have missed my point. AGNC had actual paper losses they had to take because the TBA's term is only a month. Certainly NLY and AGNC had book value declines because MBS lost value, but AGNC's loss was due to their TBA's and specified mortgage holdings.

     

    "Jefferies is cautious, calling AGNC's Q1 tale an example of how even a well-run mREIT can run afoul. 'Price and extension risk inherent in agency MBS today are risks most investors underestimate.'"

     

    NLY didn't "run afoul" because they don't trade in TBAs so there's no risk to underestimate. It's an open question as to how "well-run" an mREIT is to leave themselves open to such large TBA losses.
    7 May 2013, 02:29 PM Reply Like
  • But it was the paper (unrealized) losses of $2.21/share that killed the bv, not the $.55/share net realized loss from the TBAs
    7 May 2013, 02:39 PM Reply Like
  • jp

     

    Hate to be picky but "actual paper" losses seems to be an oxymoron. The actual losses were on the TBAs and the paper losses were on MBS
    8 May 2013, 02:27 PM Reply Like
  • is there any investment out there that is safe?? Oh .015% bonds, I forgot..
    6 May 2013, 11:27 AM Reply Like
  • Buying ARR under $6.40.
    6 May 2013, 09:19 PM Reply Like
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