Finding valuations somewhat "stretched" in 15-year mortgages, American Capital (AGNC +0.1%) CIO Gary Kain takes holdings of that paper down to 38% of the total portfolio as of the end of Q2, from 48% at the end of Q1. The money goes into 30-year mortgages, with that allocation rising to 57% from 46%.
Looking ahead, management continues to see agency MBS as looking more attractive than other fixed income products, noting continue sharp tightening in investment grade corporate paper spreads while mortgage spreads have increased over the last two years - this despite superior liquidity and financing in mortgages.
Liking what it sees in last night's earnings report, Wunderlich upgrades the stock to a Buy.
Previously: American Capital +1.3% after reporting a big Q2