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The mortgage REIT sector as a whole gains following the QE3 announcement of $40B/month in MBS...

The mortgage REIT sector as a whole gains following the QE3 announcement of $40B/month in MBS purchases (though some remain red for the session). Agency REITs are in a tricky spot as the resulting higher MBS prices will help book values, but lower rates should heighten prepayment risk. A couple of selections: AGNC +0.6% after being flat, NLY -0.6% after being off 1.3%.
Comments (20)
  • so does this mean non-agency reits and hybrid reits will outperform agency reits going forward? what about the effect of qe3 on the yield curve?
    13 Sep 2012, 01:11 PM Reply Like
  • Pre-payment risks are overstated because one needs to get a new loan approved in order to pre-pay. These days that's no walk in the park, and many mortgage holders, even those current on their payments, simply don't qualify.
    13 Sep 2012, 01:16 PM Reply Like
  • Shoud have bought gold yesterday.
    13 Sep 2012, 01:26 PM Reply Like
  • i think you mean silver
    13 Sep 2012, 01:52 PM Reply Like
  • Yes ! ,how about copper ?
    13 Sep 2012, 02:08 PM Reply Like
  • Did not buy Gold but Silver options were a big payoff today
    13 Sep 2012, 03:02 PM Reply Like
  • Iron Ore. CLF & MSB
    13 Sep 2012, 03:12 PM Reply Like
  • This stock has been a winner for me and what a dividend it pays. I thought pre-payments can not be done within a window, but after that it is okay.
    13 Sep 2012, 03:42 PM Reply Like
  • It will be interesting to see what happens to the price after X-Div date of 9/19/12.
    13 Sep 2012, 04:27 PM Reply Like
  • agnc will behave the same it always has after going x-dividend. the stock drops a few percent and a few days later people have bought the dip and it will be back up to where it was prior. all the while, shareholders take the dividends.


    price drops following x-dividend dates are not something to be worried about in this industry. worry about the macro
    14 Sep 2012, 12:05 PM Reply Like
  • Overall this will be good for mReits going forward. Any loosing of the loans for housing will be good for mReits, any boosting of Commercial loans for investment or corp growth will be good for BDCs and some Reits overall what has been proposed is a minor stimulus effect immediately/short term, mid-term & long term results still hinge upon the election results.
    13 Sep 2012, 04:54 PM Reply Like
  • Which BDCs do you like?
    13 Sep 2012, 05:44 PM Reply Like
  • Twist:


    Allow me to add to the BDC commentary.


    TCAP was, a while back my favorite pick as an undervalued BDC. It's subsequent performance has vindicated that opinion, but, now, I have been thinning out my holding, as TCAP's price/book is 1.7, which is far above almost any other BDC, most of which hover around 1.0. Given that stat, and the fact that yields have been pushed down into the low 8's, I find some other issues more compelling, now.


    Some of the issues in which I hold positions are:


    TICC (one of my current favs)
    14 Sep 2012, 10:54 AM Reply Like
  • Thanks Tack.


    What percentage of your portfolio do you allocate to these puppies?
    14 Sep 2012, 11:17 AM Reply Like
  • Twist:


    I'd guess my allocation is usually in the 10% range, plus or minus. It depends on where BDC's are on the value curve. My one iron-clad rule is that I never invest more than 5% (usually 2-3%) in any single issue of any kind.
    14 Sep 2012, 11:28 AM Reply Like
  • Still long on AGNC, bought at 30 and hanging on. Added some ARR as well at 7.34 and should have bought more. Will stay as long as the dividends keep coming.
    13 Sep 2012, 05:52 PM Reply Like
  • mReits making money on the spread between short term and long term money, doesn't this last move from the feds lesson the spread?
    If so a negative effect on profit margin?
    14 Sep 2012, 04:19 AM Reply Like
  • On the contrary, the Fed's extension of ZIRP through 2015 merely suggests that the low-rate short-term borrowing will persist. And, most of REITs' long-term holdings won't get prepaid and refi'd because borrowers can't qualify for new terms.


    So, the sweet spot continues.
    14 Sep 2012, 05:03 AM Reply Like
  • MITT went ex div today with a 77 cent dividend, the Stock price minus the div is back up 50+ cents as of 9:50am So I guess the mReits are happy with Bernanke's actions. NLY, AGNC, CYS, ARR and other mReits all Up today - some up big.


    Twist I current own PSEC and TCAP the latter the more recent purchase. I'm not unhappy with either. main and arcc are two others that folks seem to like also. as always please do your due diligence and get what best fits your risk profile and needs for security
    14 Sep 2012, 10:37 AM Reply Like
  • Other than the eventual rise of interest rates years from now the only real threat to mReits is if the economy improves enough that homeowners begin refinancing in serious numbers. The economic environment we have had since about 2008 or so are what make mReits work. They don't do well when the economy is booming. I say more power to them for making money during these times and believe they serve a useful purpose in the housing sector.
    15 Sep 2012, 09:33 PM Reply Like
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