"If [the] current pace of tapering continues, by fall, for the first time in 30 years, there will no longer be a trillion-dollar buyer in the mortgage securities market," says CYS Investments (CYS +0.4%) CEO Kevin Grant on the earnings call (transcript). Thirty years? Grant reminds that before QE, Fannie and Freddie were the $1T bid, with portfolios topping $3T at their peak. Prior to the GSEs, it was the savings & loans.
Grant notes spreads were a lot wider before the government got involved and he's prepping CYS to be ready for that opportunity.
Book value tumbled 8.5% to $9.24 in Q4, but Grant - in response to a question from JMP's Steve Delaney - more or less says book has already rebounded back to its September 30 level.
Of the big move higher in bond prices this year: "I’m not surprised at all ... I mean how many times have we seen – sell the rumor by the fact ... this is why we’re so cautious about rebalancing the portfolio in reaction to the hype that we all have when we watch CNBC."