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CYS readies for post-QE world

  • "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."
  • Previous earnings coverage
Comments (1)
  • DeepValueLover
    , contributor
    Comments (8140) | Send Message
    The Treasury market CANNOT survive without a trillion dollar buyer.
    Either the Fed will cancel the taper or Fannie and Freddie will dramatically increase their balance sheets or a combination of both.
    China and Japan don't have the firepower to meet the demand.
    Europe? Forget it?
    The American public? Are you kidding?
    The ceiling for the 30 Year T-Bond is 4%.
    Who else is there to buy this volume other than the Fed and the GSE's?
    11 Feb, 01:25 PM Reply Like
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