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
Sep. 9, 2014, 4:28 PM
Sep. 8, 2014, 3:11 PM
- Bullish on the long end of the yield curve this year to the profit of his shareholders, CYS Investments (CYS +0.1%) CEO Kevin Grant - presenting at the Barclays FInancial Services conference - still isn't seeing how long-term interest rates can go up a lot.
- Presentation slides
- He notes the Fed GDP growth forecasts throughout the recovery have consistently been too optimistic, and the 2014 and 2015 estimates were just recently been reeled in a bit. Also, inflation - even under the Fed's maybe too high growth hopes - is still seen as coming in below the 2% target.
- The forward yield curve implies a 10-year Treasury yield perhaps nearly 100 basis points higher a year from now than it stands today, and Grant wonders how housing - already sluggish - will respond.
Sep. 3, 2014, 8:04 AM
- CYS Investments (NYSE:CYS) - led by Kevin Grant - has been the mREIT poster-child for riding the trend of falling interest rates in 2014. The stock is ahead 27% YTD while continuing to pay a fat dividend. A bull on the stock for some time, Maxim - worried about CYS's exposure what's looking like higher interest rates on the way - rings the register, downgrading to Hold from Buy.
- Capstead Mortgage (NYSE:CMO) - up 9% YTD - holds a portfolio of short-duration ARMs, meaning less exposure to rising rates and less money needed to buy hedges to protect against rising rates, Maxim upgrades to Buy from Hold.
- CYS is lower by 0.4% in premarket action.
Jul. 21, 2014, 4:15 PM
Jul. 20, 2014, 5:35 PM
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
Jun. 9, 2014, 4:30 PM
Jun. 3, 2014, 9:37 AM
- This has become a rates business with not a lot of choice on the asset side, says CYS Investment CEO Kevin Grant, presenting at KBW. New qualified mortgage rules have made traditional adjustable-rate mortgages a thing of the past, he says, leaving investment choices at pretty much traditional 15- and 30-year fixed loans.
- Presentation slides
- The Treasury rally? Grant isn't surprised by it and says - given the level of the Fed Funds rate - 2.5% on the 10-year is perfectly reasonable. Grant's not impressed with the Fed's (somewhat) rosy economic projections , noting the central bank has consistently been too optimistic on the economy for several years.
- Grant and CYS have been notable in past months for allocating a sizable portion of the portfolio to Treasurys, with 5-year paper a favorite. It's all about the borrow, says Grant, who says he can generate a spread of more than 200 basis points with zero prepayment risk. Treasurys now make up 12% of the CYS portfolio.
May 28, 2014, 2:43 PM
- The swoosh down in interest rates - the 10-year Treasury yield is now off 8 bps on the session to just 2.44% - isn't really boosting the mREIT sector (REM -0.1%), and one wonders which managements hunkered down for higher rates and now find themselves overhedged. There's also a flattening yield curve and it wasn't too long ago when the bear case on mortgage REITs was slimming net interest margin, not higher rates.
- Kudos to CYS Investment (CYS +0.5%) management, which - not finding a ton of value in mortgages - loaded up on Treasurys in Q1. The stock is one of the sector's stronger performers YTD, up 24.5%.
- Others today: Annaly (NLY +0.1%), American Capital (AGNC -0.7%), Armour Residential (ARR +0.7%), Hatteras Financial (HTS -0.3%), Capstead Mortgage (CMO -0.2%), Western Asset Mortgage (WMC -0.6%)
- ETFs: MORT, MORL
May 20, 2014, 9:52 AM
- Dodd-Frank and the qualified mortgage rules associated with it aren't going away any time soon, says CYS Investments (CYS -0.2%) CEO Kevin Grant, presenting at a Wells Fargo conference. The upshot: It's going to remain tough to get a mortgage, housing will be sluggish, and a there will be a shortage of mortgages for companies like CYS to buy. "We're becoming a nation of renters."
- For adjustable mortgages, it's even more extreme. They're disappearing as new mortgage rules make it necessary to qualify borrowers on a fully indexed rate. Hatteras Financial (HTS) and Capstead Mortgage (CMO) - players in the ARMs arena - present later today.
- Reiterating what he said on the last earnings call, Grant says CYS - while it waits for mortgage spreads to widen - is buying Treasurys. The cost to finance a portfolio is next to nothing and Grant's able to get a spread often better than he can get buying mortgages.
- Presentation slides
May 15, 2014, 1:13 PM
- In the red along with the rest of the stock universe all session, a bit of green begins to creep into the mortgage REIT sector (REM -0.4%) as the 10-year Treasury yield tumbles below 2.50%.
- Annaly Capital's (NLY +0.1%) Q1 results were a notable disappointment as management seemingly found itself overhedged while rates fell sharply. One wonders if the hedges were lifted at all for Q2.
- The sector's best performer today is CYS Investments (CYS +1.1%). Management indicated on the April 22 earnings call that it thought mortgages were too pricey, so instead had put a slug of money into Treasurys - a move looking pretty good so far.
- Others: Two Harbors (TWO), Chimera Investment (CIM +0.2%), Armour Residential (ARR -0.1%), AG Mortgage Investment (MITT +0.1%)
- ETFs: MORT, MORL
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