Mortgage REIT rally snuffed out by rising yields


The good vibes from American Capital Agency (AGNC -2.7%) and American Capital Mortgage (MTGE -1.4%) earnings are somewhat snuffed out by rising Treasury yields which have returned to about their highs of early July following strong ADP and GDP prints this morning.

The 10-year Treasury yield is up 7 bps to 2.69%.

Both AGNC and MTGE rallied along with the rest of the mREIT sector (REM -1.5%) on smaller-than-expected Q2 book value declines, but rising bond yields could lead to further drops in Q3 (though Gary Kain made the case for his portfolios being well-hedged).

Annaly (NLY -1.7%) - reports tonight, Armour (ARR -1.4%), Invesco (IVR -2.3%) - reports tomorrow morning, Two Harbors (TWO -1.9%), MFA Financial (MFA -3%), Capstead (CMO -2.2%), CYS Investments (CYS -2.4%), Hatteras (HTS -1.7%).

MTGE earnings last night.

Comments (5)
  • Daan Everts
    , contributor
    Comments (276) | Send Message
     
    In some cases, their interest rate sensitivity has been completely reversed, in terms of that a .5 - 1% rise in yields will give them book value appreciation. Very strange to see them being sold off as well.
    31 Jul 2013, 11:01 AM Reply Like
  • COBeeMan
    , contributor
    Comments (2978) | Send Message
     
    Too many traders treat mREITs the same as bonds...
    31 Jul 2013, 12:19 PM Reply Like
  • brouzbeh
    , contributor
    Comment (1) | Send Message
     
    A rather meaningless sell off after MBB and 10YNote recovery. A hammer signal again for the Chartists? 20 SMA flat lining after continuous down slope for all of May, June and July.
    31 Jul 2013, 04:47 PM Reply Like
  • valueman98
    , contributor
    Comments (3) | Send Message
     
    Looks like we have a margin of safety in stock price for AGNC with stock price about 10% below BV at end of June especially now that the FED walked back their previous tapering statement on QE3 that had caused market declines in mREITS. The treasury ETFs especially TLT and ZROZ ended on the upside today after being down about 1.5% earlier today before the FED announcement. Time will tell if the FED statement will calm long term treasury rate changes for a while. I am glad management is further hedging the portfolio to lessen further slides in BV. This is especially necessary with 8 X leverage in the portfolio.
    1 Aug 2013, 01:40 AM Reply Like
  • tstreet
    , contributor
    Comments (1035) | Send Message
     
    Very unusual for MREITs to be down for the day considering that the 10 year ended positive.
    1 Aug 2013, 09:21 AM Reply Like
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