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Feb. 11, 2015, 4:11 PM
- Q4 core earnings plus drop income of $50.1M or $0.31 per share vs. $49.7M and $0.31 on Q3. Dividend is $0.30.
- Book value per share of $10.50 vs. $10.14 at the end of Q4. Today's close of $8.63 is a 17.8% discount to book.
- Total stockholder return, as defined by the change in book value plus the dividend, of 6.51% for the quarter, 27.06% for the year.
- Net interest rate spread of 1.55% down five basis points from Q3. CPR rate of 8.7% down 60 basis points.
- Leverage of 6.44:1 vs. 6.63:1 in Q3.
- Management says the Fed's pursuit of higher rates is sure to hurt interest margins, but it does have hedges in place to mitigate some of this.
- Conference call tomorrow at 9 ET
- CYS flat after hours
Feb. 10, 2015, 5:35 PM
- ABCO, ACHC, AEM, AMAT, AMBR, AUY, BIDU, CAKE, CJES, CPA, CRAY, CSCO, CSOD, CTL, CVA, CXW, CYS, DDR, DIOD, EFC, EFX, EXL, FET, FEYE, FORR, GAS, HIVE, HNI, HOS, IO, ITRI, LPSN, MET, NSIT, NTAP, NTWK, NU, NVDA, OII, PNRA, PPC, QDEL, REG, SCSS, SKX, SLF, SPRT, STMP, SWM, TAL, TCX, TRIP, TSLA, TSO, TTGT, WFM, ZEN, ZU
Feb. 3, 2015, 3:52 PM
- Unable to put any sort of positive move together even as interest rates tumbled this year, mREITs (REM +0.9%) are uniformly higher this session as the 10-year yield jumps 11 basis points to 1.78%.
- American Capital Agency (AGNC +1.3%) reported better-than-hoped Q4 results last night, but has altered its mix of portfolio holdings and hedges to brace for what it expects will be a wave of prepayments. If rates keep this up, those prepayments may not materialize.
- Annaly (NLY +1.1%), Chimera (CIM +1.5%), CYS Investments (CYS +1.3%), American Capital Mortgage (MTGE +1.8%), Hatteras (HTS +1.1%), MFA Financial (MFA +1.3%), Western Asset (WMC +1.8%), Dynex (DX +1.1%), Ellington Financial (EFC +1.2%).
Feb. 2, 2015, 2:52 PM
- "The combination of a negative duration and relatively long dated hedges lead to book value underperformance in a flat curve environment," merits a downgrade to Underperfrom for Armour Residential (ARR -5.9%), says analyst Doug Harter.
- "With above-average economic return volatility we expect CYS Investments (CYS -2.8%) to continue to have one of the lower price to book multiples among the Agency-only REITs," he says, also cutting to Underperform.
- Tight credit spreads combining with low yields will make it tough for New York Mortgage Trust (NYMT -2.2%) to meaningfully expand core EPS enough to cover the dividend, says Harter, cutting that stock to Underperform. He also notes NYMT has the highest price-to-book ratio in his mREIT coverage universe.
- Harter and team, however, still see some attractive values given the 12.9% discount to book the sector is selling for. PennyMac Mortgage Investment (PMT +0.2%), Two Harbors (TWO -0.7%) and New Residential (NRZ -1.6%) remain among top picks (though PMT and especially NRZ can hardly be considered mREITs).
- Previously: Credit Suisse downgrades three mortgage REITs (Feb. 2)
- Previously: JPMorgan previews Q4 for mREITs (Feb. 2)
Feb. 2, 2015, 7:33 AM
- Armour Residential (ARR -1.5%), CYS Investments (CYS -0.6%), and New York Mortgage Trust (NYMT -1.4%) are all downgraded to Underperform from Neutral at Credit Suisse.
- The details aren't yet available, but the team is no doubt eyeing the sharp flattening in the yield curve of late, and what that might do to earnings power going forward. Also, the sharp drop in bond yields could set the stage for a jump in refinancing, and thus prepayments.
- As for valuation, both Armour and CYS trade at sizable discounts to their last reported (Sept. 30) book value, while NYMT sells for a premium - a rarity in mREIT land these days.
- ARR is the only mover premarket, -2.4%.
Jan. 12, 2015, 10:03 AM
- The mortgage REIT space (REM -0.6%) is cut to Market Weight from Overweight at Wells Fargo, with Annaly Capital (NLY -0.4%), American Capital Agency (AGNC -0.2%), CYS Investments (CYS -0.7%), Capstead Mortgage (CMO -0.8%), American Capital Mortgage (MTGE -0.5%), AG Mortgage (MITT -1.3%), and MFA Financial (MFA -0.3%) - for now - individual names also being cut to Market Weight.
- It's an interesting move, especially in light of the significant discounts to book value nearly every stock in the sector trades at. The mortgage REITs have been especially notable of late for not being able to make any headway alongside the big rally in bond prices. Lower rates might do something for book values, but the sharply flatter yield curve (which could flatten even more once the Fed begins hiking) doesn't bode well for earnings power.
- Other ETFs: MORT, MORL
Jan. 6, 2015, 2:17 PM
- The 10-year yield has plunged all the way down to 1.94% and one would figure on some nice increases in book value for the mortgage REITs (REM -0.1%), but on the flip side are narrowing interest rate spreads (especially as the Fed still seems to be intent on hiking short rates), and what hedging losses the companies are taking.
- Other ETFs: MORT, MORL
- Individual names: Annaly Capital (NLY +0.4%), American Capital Agency (AGNC), Armour Residential (ARR -1%), CYS Investments (CYS -0.2%), Invesco Mortgage (IVZ -2.7%), New York Mortgage Trust (NYMT -0.5%), Hatteras Financial (HTS -0.3%), Western Asset Mortgage (WMC -2.7%), Ellington Residential (EARN -0.4%), Javelin Mortgage (JMI -3%).
Jan. 5, 2015, 4:01 PM
- Equity REITs are green across the board, and mortgage REITs and BDCs are showing some (but not a ton of) gains as the broader markets tumble to start the week.
- A sampling: Realty Income (O +2.1%), Omega Healthcare (OHI +1.6%), Medical Properties Trust (MPW +2.4%), Equity Residential (EQR +0.9%), General Growth Properties (GGP +0.7%), Kimco (KIM +0.9%), Public Storage (PSA +0.5%), CYS Investments (CYS +0.5%), Solar Capital (SLRC +1.1%).
Dec. 30, 2014, 12:37 PM
- Nearly all the mREITs sell at discounts to their most recently disclosed book value, with sector giants Annaly Mortgage (NYSE:NLY) and American Capital Agency (NASDAQ:AGNC) trading at double-digit discounts.
- Often a sizable haircut to book may make sense, as in the case of Armour Residential (NYSE:ARR) and Javelin Mortgage (NYSE:JMI), both of which just cut their dividend (they have the same external manager).
- Of the 24 companies examined, New York Mortgage Trust (NASDAQ:NYMT) and Capstead Mortgage (NYSE:CMO) stand alone in trading at premiums to book value.
- The full list
Dec. 9, 2014, 12:57 PM
- Unable to catch a bid for a few sessions, mortgage REITs (REM +1%) have turned higher in afternoon action, led by Annaly (NLY +0.7%) and American Capital Agency (AGNC +1.5%).
- Helping are jitters in the stock market (though U.S. averages are well off the lows), and a 10-year Treasury yield that's retreated all the way to 2.21% after hitting the mid-2.30s on the back of Friday's strong jobs number.
- Armour (ARR +1.1%), Two Harbors (TWO +0.9%), CYS Investments (CYS +1.4%), Invesco (IVR +1.8%), American Capital Mortgage (MTGE +1%), Hatteras Financial (HTS +2%), Capstead (CMO +2%).
- Other ETFs: MORT, MORL
- Also showing some green are the recently beaten-up BDCs, including Prospect Capital (PSEC +0.2%), Fifth Street Finance (FSC +0.2%), Ares Capital (ARCC +0.5%), FS Investment (FSIC), Triangle Capital (TCAP +1.7%).
- ETFs: BDCL, BDCS, BIZD
- Previously: Money flows back into fixed income (Dec. 9, 2014)
Dec. 8, 2014, 4:03 PM
- CYS Investments (NYSE:CYS) declares $0.30/share quarterly dividend, in line with previous.
- Forward yield 13.30%
- Payable Dec. 29; for shareholders of record Dec. 22; ex-div Dec. 18.
Nov. 19, 2014, 3:42 PM
- A check of the mortgage REITs following FOMC minutes which shows the discussion moving a bit more seriously towards rate hikes finds the sector (REM -0.5%) modestly lower.
- Individual names: Annaly (NLY -0.3%), American Capital Agency (AGNC), CYS Investments (CYS -0.3%), Invesco Mortgage (IVR -0.9%), New York Mortgage Trust (NYMT -0.4%), Hatteras Financial (HTS -0.8%), MFA Financial (MFA -1%), Capsteam Mortgage (CMO -0.6%), Ellington Residential (EARN -0.4%).
Oct. 29, 2014, 1:43 PM
- Fed purchases of mortgage-backed securities are ending today, but reinvestments are likely to keep a firm bid in the market, says Deutsche's MBS team. The "real risk" to the MBS market won't come until the Fed ends reinvestments - early 2016 at the soonest, and maybe not until 2017.
- QE's end, says the team, leaves the Fed with $1.7T in MBS holdings and private investors with just $3.5T. The Fed's massive holdings - 1/3 of the universal amount, but 1/2 of dollar duration - keep a source of volatility out of the market.
- The end of the Fed as a net buyer will be about the first time since the early 1990s when MBS haven't been getting a bid from either the GSEs, Treasury, or Fed.
- ETFs" REM, MORT, MORL
- Names of interest: Annaly (NLY -1.6%), American Capital Agency (AGNC -2.5%), Armour (ARR -1.2%), Hatteras (HTS -1.6%), CYS Investments (CYS -1.7%)
Oct. 21, 2014, 9:32 AM
- All this talk over the last few days about a material loosening coming in mortgage standards is a whole lot of nothing, says CYS Investments (NYSE:CYS) CEO Kevin Grant, speaking on the earnings call. As far as he knows, the CFPB hasn't signed on to even a little bit of the FHFA plan to try and ease underwriting standards, and Grant has no reason to expect the agency will budge.
- The CFPB's mandate - he reminds - is to limit risk, so why would it do anything but allow only essentially perfect credits to get mortgages.
- Asked about whether CYS is ready to deploy its buyback authorization, Grant says the best place to put capital to work right now is in the "cheap" mortgage market. He notes CYS put $1.5B to work in mortgages in Q3.
- As for the tumult of the last couple of weeks, Grants notes the thin trading desks and inventories at the big banks mean big moves in prices during such dislocations, and CYS is happy to step in as a buyer during these events.
- CYS is lower by 1.2% in early action as core earnings dipped last quarter - just covering the dividend - and book value dropped a bit.
- Previously: CYS boosts exposure to mortgages
Oct. 20, 2014, 4:19 PM
- Q3 core earnings plus drop income of $49.7M or $0.31 per share vs. $53.3M and $0.33 in Q2. Dividend is $0.30
- Book value per share of $10.14 vs. $10.31 at end of Q2. Today's close of $8.94 is an 11.8% discount to book.
- Net interest spread of 1.60% falls 18 basis points from Q2, as cost of funding and hedging rose to 1.31% in Q3 from 1.08% a quarter earlier.
- CPR of 9.3% rises from 7.6% in Q2.
- Leverage increases modestly - to 6.63:1 from 6.35:1.
- Portfolio composition: The company rotated somewhat out of its long Treasury position, selling $1.5B of government paper and buying a similar amount of 30-year fixed mortgages. Management feels the current environment should limit prepayments and is therefore comfortable boosting exposure to long-dated fixed mortgages.
- Conference call tomorrow at 9 ET
- Previously: CYS Investments EPS in-line
- CYS +0.35% AH
Oct. 20, 2014, 4:08 PM
- CYS Investments (NYSE:CYS): Q3 EPS of $0.31 in-line.
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