Oct. 1, 2014, 3:02 PM
- Despite a strong period for mortgage REITs ever since the financial crisis, most of the benefits from structural changes to the mortgage market have yet to be realized, says American Capital Agency (AGNC +1.8%) and American Capital Mortgage (MTGE +0.8%) CIO Gary Kain, wrapping up his company's Mortgage REIT day with a look at the future.
- Presentation slides
- Why is this? First, Fed MBS purchases have dwarfed the declines in GSE portfolios; second, the GSEs/FHA still account for the vast majority of new originations; third new non-agency securitization volumes are negligible; fourth GSE credit risk transfers are only beginning to ramp up.
- At some point, there's going to be greater reliance on private capital, says Kain, and he and his team believe it's going to provide significant opportunity in the mREIT (REM +0.6%) space in the intermediate to longer term in the agency, non-agency, and MSR sectors.
- Previous coverage
Oct. 1, 2014, 9:20 AM
- American Capital Agency (NASDAQ:AGNC) and American Capital Mortgage (NASDAQ:MTGE) CIO Gary Kain is set to launch the all-day proceedings in a few minutes.
- Link to webcast and presentations
- Noted in Kain's slides are the fast pace of share repurchases at the two companies amid the large discount between price and book value which opened up last year. AGNC bought back 10% of its stock in 2013, far more than the majority of its agency REIT peer group. MTGE repurchased 13% of its float in 2013, also several orders of magnitude larger than much of its non-agency REIT peer group.
Sep. 30, 2014, 4:09 PM
- The first monthly dividend is scheduled to be declared in October and paid in November. Concurrent with monthly dividend announcements, American Capital Agency (NASDAQ:AGNC) will also disclose (in intra-quarter months) its estimate of month-end net asset value.
- Source: Press Release
- Shares are trading, but currently unchanged in after-hours action.
Sep. 19, 2014, 3:32 PM
- Leading the mREIT sector (REM +0.2%) higher this session are American Capital Agency (AGNC +1.9%) and American Capital Mortgage (MTGE +1%) after the two maintained their $0.65 per share quarterly payout last night. Neither move should have been a surprise as both comfortably out-earned their dividend last quarter.
- Also maintaining its payout ($0.30 per shares) after the bell yesterday was Annaly Capital (NLY +0.8%).
- The sector is also getting a break from rising rates with the 10-year Treasury yield lower by four basis points to 2.58%
- ETFs: MORT, MORL
Sep. 18, 2014, 4:41 PM
Sep. 18, 2014, 1:10 PM
- The entire sector is in the red, but the biggest declines are being seen in the industry giants, about the only spots large investors can move a lot of shares quickly: Annaly Capital (NLY -1.6%), American Capital Agency (AGNC -1.6%).
- Yesterday's FOMC statement may have left in the "considerable period" language, but the committee remains on course to begin a rate hike cycle in less than a year.
- Further, the selloff on the long end of the curve can has reached the sizable stage - the 10-year yield is up 32 basis points in a month, and has now erased about all of the summer's decline. Book values could take a hit (though hedging is likely to ease the pain).
- REM -0.7%
- Other ETFs: MORT, MORL.
- Other names: Armour (ARR -1.3%), Invesco (IVR -0.7%), Hatteras (HTS -3%), Capstead (CMO -0.3%), Western Asset (WMC -0.4%)
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. 2, 2014, 2:26 PM
- REITs and other so-called "shadow bankers" for the last several years have used captive insurers to join Federal Home Loan Banks, thus getting access to more dependable financing and better terms than they otherwise could.
- The FHFA for some time has voiced its concern over the practice, and under new rules just proposed, would sunset those existing memberships over a five year period.
- ETFs: REM, MORT, MORL
- Two Harbors (TWO -1.8%), Invesco Mortgage (IVR -1.9%), Hatteras Financial (HTS -1.2%), Dynex Capital (DX -1.1%), PennyMac Mortgage (PMT -1.5%), Annaly Capital (NLY -0.8%), American Capital Agency (AGNC -0.3%).
Jul. 29, 2014, 3:39 PM
- "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
Jul. 29, 2014, 11:35 AM
- Finding valuations somewhat "stretched" in 15-year mortgages, American Capital (AGNC +0.1%) CIO Gary Kain takes holdings of that paper down to 38% of the total portfolio as of the end of Q2, from 48% at the end of Q1. The money goes into 30-year mortgages, with that allocation rising to 57% from 46%.
- Webcast and presentation slides
- Looking ahead, management continues to see agency MBS as looking more attractive than other fixed income products, noting continue sharp tightening in investment grade corporate paper spreads while mortgage spreads have increased over the last two years - this despite superior liquidity and financing in mortgages.
- Liking what it sees in last night's earnings report, Wunderlich upgrades the stock to a Buy.
- Previously: American Capital +1.3% after reporting a big Q2
Jul. 28, 2014, 4:16 PM
- Net spread and dollar roll income of $0.87 per share compares $0.71 in Q1, and to the $0.65 dividend.
- Book value per share of $26.26 up 7.2% from June 30 book value of $24.49. Today's close of $23.69 is a 9.8% discount to book. Dividend plus boost in book value translates to 9.9% economic ROE for Q2.
- CPR of 9% up 200 basis points from Q1.
- Net interest spread of 1.84% up 25 basis points from Q1.
- Average "at risk" leverage of 7.1x vs. 7.2x in Q1.
- CIO Kain takes a victory lap: "Our results this quarter were bolstered by several important strategic decisions ... Most important was our decision to maintain our leverage as we believed the supply and demand outlook for agency MBS was very positive despite the tapering of Fed purchases."
- Conference call tomorrow at 11 ET
- AGNC +1.3% AH
- Previously: American Capital Agency beats by $0.19
Jul. 28, 2014, 4:05 PM
Jul. 27, 2014, 5:35 PM
Jul. 17, 2014, 7:09 AM
- American Capital Agency (NASDAQ:AGNC) and American Capital Mortgage (NASDAQ:MTGE) as of yesterday disclose a 4.53% stake in Hatteras Financial (NYSE:HTS) vs. their combined 8.5% stake from late January.
- AGNC and MTGE CIO Gary Kain - late last year and early this year noting the absurdity of large swaths of the mREIT industry trading at sizable discounts to book value - was an aggressive buyer of his own stock and that of other mortgage REITs (though Hatteras was the only publicly disclosed purchase).
- Not including sizable dividends, Hatteras has returned about 20% YTD, as has American Capital Agency. American Capital Mortgage is up about 12.5%.
Jul. 10, 2014, 10:17 AM
- Working today as both stock and bond yields fall in response to banking troubles in Portugal are both equity and mortgage REIT names.
- Leading in the mortgage REIT sector are Annaly (NLY +0.8%) and American Capital Agency (AGNC +0.8%), and a sampling of equity REIT names: Realty Income (O +0.6%), Omega Healthcare (OHI +1%), Ventas (VTR +1.2%), Medical Properties (MPW +1%), Avalon Bay (AVB +0.5%), Simon Property (SPG +0.8%), Boston Properties (BXP +0.8%)
- ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, FNIO, WREI, REM, MORL, MORT
Jul. 3, 2014, 9:56 AM
- A few days ago, the 10-year Treasury yield stood at about 2.50%, but it's been on the rise all week and shot up to near 2.7% this morning following the strong jobs print and drop in unemployment to 6.1%. Checking the short end of the curve, Eurodollar futures are selling off as well, and now have baked in more than one rate hike between now and one year from now, and 75 basis points of hikes by the end of 2015.
- Previously: Treasury yields jump, gold slumps after strong jobs print
- Off 1.1% today, Annaly Capital (NLY) is down nearly 5% since this time last week, with a similar move having taken place in American Capital Agency (AGNC -1.2%).
- Chimera (CIM -1.4%), CYS Investments (CYS -1%), Invesco Mortgage (IVR -1.8%), American Capital Mortgage (MTGE -1.6%), New York Mortgage Trust (NYMT -1.2%), AG Mortgage (MITT -1.8%), Ellington Residential (EARN -0.7%), Dynex (DX -0.8%), MFA Financial (MFA -0.9%).
- ETFs: REM, MORT, MORL
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