Dec. 8, 2014, 4:03 PM
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
Oct. 19, 2014, 5:35 PM
Oct. 13, 2014, 4:19 PM
- Both equity and mortgage REITs saw plenty of buying as nearly all of the rest of the market was lit up bright red, and Treasury ETFs signaled a sharp drop in yields when government bonds reopen for trade tomorrow (closed this session for Columbus Day).
- A sampling of equity names: Senior Housing Properties (SNH +1.2%), Medical Properties Trust (MPW +1.4%), Gramercy Property Trust (GPT +1.7%), Equity Residential (EQR +0.7%), Inland Real Estate (IRC +0.9%), Sovran Self Storage (SSS +1.1%), Highwoods Properties Trust (HIW +1%).
- One equity REIT sector in the red along with the rest of the market is lodging amid worsening Ebola fears: Ashford Hospitality Trust (AHT -2.9%), Sunshine Hotel Investors (SHO -1.4%), LaSalle Hotel Properties (LHO -1.5%), Summit Hotel Properties (INN -1.5%).
- Mortgage REITs: American Capital Agency (AGNC +1.4%), CYS Investments (CYS +2.2%), Invesco (IVR +1.1%), American Capital Mortgage (MTGE +1.5%), Western Asset (WMC +1.1%).
- ETFs: IYR, VNQ, REM, MORL, MORT, DRN, URE, REZ, SRS, RWR, SCHH, ICF, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
Oct. 9, 2014, 1:55 PM
- The Fed is nervous higher rates will boost volatility, put a dent in asset (stock and home) prices, and push the U.S. into recession, says Wells Fargo analyst Joel Houck. With the Fed thus trapped from hiking, Houck remains bullish on the mREITs (REM -0.1%), notably American Capital Agency (AGNC +0.7%), CYS Investments (CYS +0.1%), Hatteras Financial (HTS), and Annaly Capital (NLY +0.1%).
- Previously: Mortgage REITs see more gains as averages slide
Oct. 9, 2014, 10:40 AM
- It's been a good week for mortgage REITs (REM +0.7%) which rose on Tuesday as the broad market tumbled and brought yields down with it, rose more on Wednesday, this time alongside a major broad market rally on dovish FOMC minutes, and are on the move higher again today as the averages again head south.
- Down to 2.28% earlier in the session (a 16-month low), the 10-year Treasury yield is now flat on the day at 2.32%.
- This week's strong move comes following a tough September in which the mREITs gave back a nice chunk of their YTD gains.
- Annaly (NLY +1.2%) is up nearly 5% over the last four sessions. American Capital Agency (AGNC +1.5%) is ahead more than 6%.
- Others: Armour (ARR +1%), Chimera (CIM +1%), CYS Investments (CYS +1.2%), New York Mortgage (NYMT +1.3%), Anworth (ANH +0.8%), Dynex (DX +1%), Javelin (JMI +1.5%), Five Oaks (OAKS +0.9%).
- Other ETFs: MORT, MORL
Oct. 7, 2014, 11:12 AM
- Sector giants Annaly Capital (NLY +1.2%) and American Capital Agency (AGNC +1%) are pacing gains in the mortgage REIT sector (REM +0.3%) on a day when the major averages are lower by about 0.75% and the 10-year yield at 2.39% has about erased all of its big post-Labor Day gain.
- Additional ETFs: MORT, MORL
- Among other names, there's CYS Investments (CYS +0.5%) - whose management has been the most publicly skeptical of the higher interest rates meme.
Sep. 30, 2014, 3:05 PM
- Many in the sector (REM -0.9%) presented today at the JMP Financial Services and Real Estate Conference. Those heard in full by this reporter - CYS Investments (CYS -1.6%), Hatteras Financial (HTS -0.9%), and MFA Financial (MFA -1.3%) - presented nothing alarming, but the sector is nevertheless lit up bright red.
- Other presenters included Capstead Mortgage (CMO -1.2%), Arlington Asset (AI -2.2%), Dynex Capital (DX -1.7%), Invesco (IVR -1.2%), Armour (ARR -2%), New York Mortgage Trust (NYMT -3.2%), Javelin Mortgage (JMI -1.5%), Five Oaks Investment (OAKS -1.9%), and Apollo Residential (AMTG -1.1%).
- Related ETFs: MORT, MORL
- Previously: CYS's Grant not buying hawkish ideas from Fed
- Previously: Hatteras updates on Q3 at conference
- Previously: MFA Financial positions for further housing improvement
Sep. 30, 2014, 9:23 AM
- Maybe the 2.5% 10-year Treasury is cheap, says CYS Investments (NYSE:CYS) CEO Kevin Grant, presenting at the JMP Financial Services and Real Estate Conference. The Fed is finally starting to get it, he says, noting it's cut its GDP growth estimates in coming years to just 1.8-2.6%.
- Presentation slides
- Doing some back-of-the-envelope work, Grant says the fracking revolution - by reducing U.S. imports - is adding about 0.6% to GDP growth, so the underlying numbers are somewhat worse than the weak projections.
- This could be one of the shortest rate hike cycles ever, says Grant, suggesting Jon Hilsenrath's idea of one hike and then a very long pause makes more than a little bit of sense.
- As for the "dots" which show a series of rate hikes beginning in the middle next year, Grant says they make no sense given the Fed projections of weak GDP growth and low inflation.
Sep. 17, 2014, 2:51 PM
- Another $10B taper this month brings QE to just $5B monthly, an amount the FOMC expects to go down to zero with its next policy meeting. The "dots" shifted somewhat higher - meaning maybe a slightly earlier start to Fed rate hikes and a higher level of Fed Funds at the end of the next few years, with the median forecast being 2.9% at the end of 2016.
- Mortgage REITs (REM +0.2%) have been under pressure in the sessions ahead of the FOMC, and are mostly snoozing through today's news.
- Annaly (NLY -0.1%), American Capital Agency (AGNC +0.1%), CYS Investments (CYS +0.2%), New York Mortgage Trust (NYMT +0.5%), Dynex (DX +0.8%), Ellington Residential (EARN +1.2%), Javelin (JMI +1.3%).
- Previously: FOMC statement and projections lean hawkish
- Previously: Yellen press conference: Falling UE rate still masking labor market weakness
Sep. 10, 2014, 9:49 AM
- Last night's cut in the quarterly dividend to $0.30 from $0.32 was perhaps unexpected given CYS (CYS -2%) out-earned the $0.32 payout in Q2 (core earnings plus drop income of $0.33).
- The company, however, benefitted greatly in H1 from a big bet on declining interest rates, and a dig deeper into the Q2 results shows management boosting and lengthening its hedges as it awaits more attractive pricing in the RMBS market.
Sep. 9, 2014, 5:36 PM
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