More on Wunderlich upgrade of American Capital Agency

|By:, SA News Editor

"We think it is reasonable to extend duration in an environment where extension risk is priced into the market, and that is what we believe American Capital Agency (AGNC -0.6%) is doing with its current asset selection," says Wunderlich's Merrill Ross, upgrading the stock to a Buy and lifting the price target by $3 to $26.50.

He notes price discovery in agency MBS amid the QE taper has been far less complicated than expected. Dividends should continue to be well covered by core earnings and AGNC (along with much of the sector) continues to trade at a sizable discount to book value.

Previously: American Capital +1.3% after reporting a big Q2

Previously: Notes from American Capital earnings call