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Unlikely gain for Ellington Financial after getting roughed-up in Q1

May 06, 2016 3:09 PM ETEllington Financial Inc. (EFC) StockEFCBy: Stephen Alpher, SA News Editor1 Comment
  • The company lost $23.2M in Q1 and more than 5% of its book value as it was caught on the wrong side of the major rally in high-yield off the Feb. 11 bottom. While the corporate high-yield in which Ellington (EFC +1.1%) was short surged higher, structured credit markets - of which Ellington was long - failed to participate.
  • In the earnings release, CEO Laurence Penn says the company continues to have concentrated short positions in various high-yield corporate credit indices.
  • Penn: "With yield spreads on our long portfolio having widened and those on our short portfolio having tightened, our conviction remains as strong as ever in the relative attractiveness of our overall position. We continue to believe that widening credit spreads remain a significant risk, and that the yields that we can realize on our structured credit portfolio will ultimately outpace those on our hedges."
  • Earnings call presentation slides
  • In other potentially bullish developments, Ellington's portfolio of consumer loans increased by more than 25% in Q1, and portfolio of non-QM mortgages more than doubled.
  • Previously: Nasty quarter at Ellington Financial (May 6)

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