Apr. 29, 2014, 11:33 AM
- It's hard to get worked up about the taper upsetting the supply/demand picture in MBS this year, says American Capital Agency (AGNC -0.9%) CIO Gary Kain on the earnings call. Thanks to the slow pace of mortgage originations this year, 2014 will likely have the smallest pace of net MBS supply (gross supply minus Fed purchases) of any year this century (excepting the 2009 blowup). See presentation slides, page 12.
- Given these dynamics, says Kain, it's hard to make the argument that mortgages are overpriced at the moment.
- Previously: CYS Investment's Kevin Grant says mortgages are too pricey and awaits a pullback.
- Next, Kain looks (page 13) at the changing investor base for MBS as the Fed has become the gorilla. Who's been selling? Everyone, but it's mostly money managers who have cut back while the Fed fattened up its holdings. As for mortgage REITs, they've not only cut back their holdings (account for less than 5% of the market), but they've reduced leverage too.
- Previously: American Capital beats estimates; grows book value
Apr. 24, 2014, 10:36 AM
- A check of the mortgage REITs (REM +0.1%) finds not a lot going on stock price-wise following the first Q1 earnings reports from the sector this week (CYS Investments and Hatteras). As expected, book values grew and prepayments remained at a low level.
- Perhaps unexpected was a good deal of caution from CYS management about mortgage prices - right now, it's finding better value in Treasurys, and awaits a pullback in MBS prices before boosting those holdings. "The mortgage market is a little kid playing with matches," said CEO Kevin Grant on the earnings call (transcript). "We just don't know when everybody's fingers are going to get burnt. The traders that play in this market, they know this and they know they are playing with matches."
- Amid the low supply of MBS out there, Hatteras (HTS +0.1%) management on its call (transcript) says it now has 10 originators delivering wholesale product to the company covering more than half of monthly cash flow needs. Up next is expansion into jumbo ARMs.
- Other sector ETFs: MORT, MORL
- Individual names: Annaly (NLY +0.6%), American Capital (AGNC +0.7%), (MTGE +0.2%), Armour (ARR +0.1%), Two Harbors (TWO -0.6%), Invesco (IVR -0.1%), Capstead (CMO +0.3%), MFA Financial (MFA +0.1%), Western Asset (WMC +0.5%).
Apr. 22, 2014, 9:20 AM
- Mortgages aren't that cheap anymore, says CYS Investments CEO Kevin Grant, on the earnings call. Asked a question about the sale of MBS in Q1 and purchase of Treasurys, Grant says his team can actually create a spread with government paper similar to that of mortgages.
- The bottom line according to CYS management: Low volume and high prices in mortgages make it a good idea to wait for a pullback before becoming aggressive buyers again.
- Previous earnings coverage
- Shares +1.7% premarket
Apr. 21, 2014, 4:18 PM
- Core EPS plus drop income totals $0.35, beating estimates by a penny and compares to dividend of $0.32.
- As expected with the big gain in fixed income in Q1, book value per share of $9.68 bounced from $9.24 three months previous. The rebound is larger when considering the $0.32 dividend. The current price is a 9.8% discount to book.
- Interest rate spread of 1.89% is unchanged from Q4. CPR of 5.6% vs. 5.7% in Q4.
- Company cut agency portfolio size to $11.8B from $13.9B, and added $1.5B of Treasurys. Adjustment made to "reduce duration gap ... be in better position to take advantage of a possible cheapening of the Agency RMBS market." Leverage ratio of 6.32:1 compares to 6.97:1 in Q4.
- No shares repurchased during quarter vs. 5.2M bought during Q4.
- CYS +1.4% AH
- CC tomorrow at 9 ET
- Press release, Q1 results
Apr. 21, 2014, 4:06 PM
Apr. 21, 2014, 12:10 AM
Apr. 20, 2014, 5:35 PM
Apr. 10, 2014, 11:49 AM
- Lit up bright green as the market's momentum names again break down and lead the averages - and Treasury yields - lower are the mortgage REITs (REM +0.5%).
- The 10-year yield is off six basis points to 2.63% and Eurodollar futures in the last few sessions have rallied strongly, pricing out at least one rate hike between now and the end of 2016.
- CYS Investments (CYS +1.7%), Invesco Mortgage (IVR +1.3%), Hatteras Financial (HTS +1.3%), MFA Financial (MFA +1.4%), Two Harbors (TWO +0.8%), American Capital (AGNC +0.6%), (MTGE +0.5%).
- One day after making a number of additions to its management team - including a couple of hires from the New York Fed - Annaly (NLY +0.5%) is also posting gains.
- Related ETFs: MORT, MORL
Apr. 4, 2014, 3:15 PM
- What's working today? With the exception of Western Asset Mortgage which had a massive secondary offering, the mREIT sector is nearly universally higher as money rushes out of the previously perkier areas of the market.
- Not hurting is a seven basis point decline in the 10-year Treasury yield to 2.73%.
- Up the most are the two largest and also investor favorites Annaly (NLY +1.4%) and American Capital Agency (AGNC +1.3%). Others: CYS Investments (CYS +1%), American Capital Mortgage (MTGE +0.5%), MFA Financial (MFA +0.5%), Dynex (DX +0.9%), Armour (ARR +0.5%).
- Related ETFs: REM, MORT, MORL
Mar. 24, 2014, 9:43 AM
- It's not just Annaly. Compass Point is ringing the register on a wide swath of the mortgage REIT industry today. American Capital Agency (AGNC -1.6%), Anworth Mortgage (ANH -1.3%), Armour Residential (ARR -1.2%), CYS Investments (CYS -1%), Hatteras (HTS -1.5%), and Western Asset Mortgage (WMC -1.4%) are all cut to Hold from Buy.
- All have been big gainers this year, likely narrowing their discounts to book value and - in at least one case - maybe climbing above it.
- ETFs: REM, MORT, MORL
Mar. 19, 2014, 3:13 PM
- A check of sectors following the FOMC statement and updated projections suggesting a quickened pace of rate hikes in the future finds the banks and life insurers notably moving higher. Both groups have struggled earning a spread amid ZIRP and are positively levered to higher rates.
- Lenders: Bank of America (BAC +1%), Citigroup (C +1%), JPMorgan (JPM), Regions (RF +1.7%), KeyCorp (KEY +0.9%), SunTrust (STI +0.7%).
- Life insurers: MetLife (MET +1%), Prudential (PRU +0.7%), Lincoln National (LNC +1%).
- Related ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, KIE, SEF, IYG, IAK, FXO, PFI, KBWB, FNCL, FINU, RWW, RYF, PSCF, KBWP, KBWI, FINZ, KBE, KRE
- Not necessarily positively levered to higher rates are the mortgage REITs (REM -1.6%): Annaly (NLY -1.8%), American Capital (AGNC -1.7%), (MTGE -1.9%), Armour (ARR -1.3%), Two Harbors (TWO -2%) CYS Investments (CYS -3.3%), Capstead (CMO -1.3%), MFA (MFA -1.8%).
- Related ETFs: MORT, MORL
Mar. 13, 2014, 3:16 PM
- Ports in a storm on a tough day for the major averages (S&P 500 -1.4%), the mREIT sector is mostly in the green, with sector giants Annaly (NLY +1.1%) and American Capital (AGNC +1.1%) leading the way.
- The 10-year Treasury yield is off eight basis points to 2.65%.
- Earlier: Dividend hikes at mREITs? Capstead (CMO +0.9%) and Ellington Residential (EARN +1.9%) boost payouts by 10%.
- Others: Armour (ARR +0.9), CYS Investments (CYS +0.9%), Dynex (DX +0.8%).
Mar. 10, 2014, 4:04 PM
Mar. 7, 2014, 7:11 AM
- Keep an eye on the hot mortgage REIT sector today as Deutsche cashes in its chips on three bullish calls.
- New York Mortgage Trust's (NYMT) cut to Hold is a valuation call, with analyst Stephen Laws acknowledging solid Q4 results and good prospects going forward, but noting the stock price is already near his raised price target of $7.75 (from $7). NYMT is the rare mREIT at the moment trading above book value.
- Neither CYS Investments (CYS), nor American Capital Mortgage (MTGE) are at book, but both have moved a lot closer to it this year, and Laws cuts both to Hold, believing dividends, not capital appreciation will drive any returns from current levels. "Given investor concerns of higher interest rates, we believe it is unlikely that shares of agency MBS managers will trade at or above book value in 2014."
- Deutsche, he says, currently forecasts the 10-year Treasury yield to hit 4% before year-end, likely keeping a lid on price-to-book ratios for the agency players.
- Related ETFs: MORT, MORL, REM
Feb. 26, 2014, 9:58 AM
- A check of the mREIT sector (REM +0.8%) following better-than-expected Q4 results from Annaly finds about all the individual names in the green.
- Like many earlier reporters, Annaly experienced a pleasing drop in prepayments during Q4, leading to a widening net interest margin.
- American Capital Agency (AGNC +0.8%), Armour Residential (ARR +0.9%), CYS Investments (CYS +0.6%), Hatteras Financial (HTS +0.9%), Dynex (DX +1.1%)
- ETFs: MORT, MORL
- Annaly's earnings call begins shortly. The stock is up 3.5% in early action.
Feb. 11, 2014, 1:14 PM
- "If [the] current pace of tapering continues, by fall, for the first time in 30 years, there will no longer be a trillion-dollar buyer in the mortgage securities market," says CYS Investments (CYS +0.4%) CEO Kevin Grant on the earnings call (transcript). Thirty years? Grant reminds that before QE, Fannie and Freddie were the $1T bid, with portfolios topping $3T at their peak. Prior to the GSEs, it was the savings & loans.
- Grant notes spreads were a lot wider before the government got involved and he's prepping CYS to be ready for that opportunity.
- Book value tumbled 8.5% to $9.24 in Q4, but Grant - in response to a question from JMP's Steve Delaney - more or less says book has already rebounded back to its September 30 level.
- Of the big move higher in bond prices this year: "I’m not surprised at all ... I mean how many times have we seen – sell the rumor by the fact ... this is why we’re so cautious about rebalancing the portfolio in reaction to the hype that we all have when we watch CNBC."
- Previous earnings coverage
CYS vs. ETF Alternatives
Other News & PR