- The big picture view says better entry points are coming soon - perhaps after the taper actually begins (September?) and a new Fed chief is announced (October?).
- The team's favorite names are those associated with the sector that really aren't mREITs, but instead have more-specialized business models: Newcastle Investment (NCT +0.5%), its spinoff New Residential (NRZ +1.8%), and PennyMac Mortgage Investment Trust (PMT -0.1%).
- In the security-focused names, top picks are Two Harbors (TWO -0.8%) and Ellington Financial (EFC +0.1%), and American Capital Mortgage (MTGE).
- Thus far in Q3, CS sees sector book values off 4% amid a 40 bp increase in rates. The good news is credit spreads haven't continued to widen, but a coming taper announcement could blow them out again.
- Sector ETFs: REM, MORT, MORL.
- Earlier: Two Harbors gets an upgrade.