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PR Newswire (Tue, 2:14PM)
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MTGE vs. ETF Alternatives
American Capital Mortgage Investment Corp. invests and manages a leveraged portfolio of agency mortgage-related investments, non-agency mortgage investments and other mortgage-related investments, which it refers to as its target assets.
Wednesday, Jan 293:15 PM
Wednesday, Jan 293:15 PM| 11 Comments
- For the most part, the mREIT sector (REM -0.2%) is getting little boost from another big swoosh down in interest rates - the 10-year Treasury yield off 7 basis points to 2.69%. Confused about how to play the dislocations caused by massive QE purchases of MBS, mREIT managements are likely similarly confused about how to play the taper (another $10B reduction today).
- Peeking into the green in afternoon action are Annaly (NLY +0.9%), Chimera (CIM +0.8%), and American Capital Agency (AGNC +0.2%), but Armour (ARR -0.7%), Invesco (IVR -1.2%), American Capital Mortgage (MTGE -1.2%), Hatteras (HTS -1.7%), and Western Asset (WMC -2.6%) are nicely lower.
- Capstead Mortgage is set to be the first of the mREIT to report Q4 results after the bell today.
- ETFs: MORT, MORL
Thursday, Jan 232:23 PM
Thursday, Jan 232:23 PM| 16 Comments
- One sector nearly fully in the green on a big down day for the broad averages is the mortgage REITs (REM +0.6%) as investors - worried about further declines in book value - take comfort from a big 10 basis point dip in the 10-year Treasury yield to 2.76% (off from 3% at the start of the year).
- Leading are CYS Investments (CYS +3.1%), Annaly (NLY +1.7%), American Capital (AGNC +1.4%), (MTGE +1.5%), Invesco (IVR +1.8%), Anworth (ANH +1.3%), and AG Mortgage Investment (MITT +0.7%). The sector elephants - Annaly and American Capital Agency - are head 6% and 8% YTD, respectively.
- With the big drop in yields at the long end, how long will it be before investors stop fretting about declines in book value and shift to concern over narrowing spreads!
- Related ETFs: MORT, MORL
Monday, Jan 133:08 PM
Monday, Jan 133:08 PM| 7 Comments
- What might pull the mREIT sector out of its brutal slump? A slide in the broad equity market for one. An out of nowhere 1%-plus dive in the major averages is being felt in the bond market, where the 10-year yield is off another 3 basis points to 2.83%, and mortgage REITs (REM +0.4%) - whose book values have been savaged by the big jump in interest rates since last spring - are responding.
- Annaly (NLY +1.2%), American Capital (AGNC +1.4%), (MTGE +1.1%), Two Harbors (TWO +1.4%), CYS (CYS +1.9%), Western Asset (WMC +1.5%), AG Mortgage (MITT +1.1%), and Ellington Residential (EARN +0.8%) are leading. This just in: Sector giants American Capital Agency and Annaly are ahead 6% and 4% YTD, respectively.
- The iShares 20+ Year Treasury Bond ETF (TLT +0.6%) is up 3.2% for the year.
Friday, Jan 1011:18 AM
Friday, Jan 1011:18 AM| 9 Comments
- It's a big dip in interest rates today (the 10-year yield off 8 bps to 2.88%), but buyers are doing little more than tiptoeing back into beaten-down mortgage REITs.
- Leading are Annaly (NLY +1.3%) and American Capital (AGNC +1.4%), (MTGE +1.1%), and Armour (ARR +0.7%), CYS Investments (CYS +1.2%), and Invesco (IVR +1.1%) are also posting decent gains. All are quietly up in the area of 5-10% off of their 52-week lows set late last year.
- Related ETFs: REM, MORT, MORL
Wednesday, Dec 182013, 4:41 PM|Wednesday, Dec 182013, 4:41 PM| 2 Comments
Monday, Dec 162013, 3:35 PM
Monday, Dec 162013, 3:35 PM| 27 Comments
- The mortgage REIT sector (REM -0.6%) is lower on a bright green day for the rest of the market, with Anworth Mortgage's (ANH -1.2%) 33% dividend cut Friday night offering another excuse to Sell. Anworth is an agency mortgage player, investing mostly in adjustable mortgages. Anworth's new forward yield of 7.5% is so far out of line with the double digits of the rest of the industry, it suggests even more declines are in store for the stock, or big dividend cuts lie ahead for competitors. At $4.19, Anworth is selling for a near-30% discount to September 30 book value.
- Down the most today is American Capital Mortgage (AGNC -2.7%), and its non-agency cousin, American Capital Agency (MTGE -1.7%) is off sharply as well.
- Others: Annaly (NLY -1.3%), Armour (ARR -1.2%), Western Asset (WMC -1.8%), Apollo (AMTG -1.4%), Ellington (EFC -0.4%), (EARN +0.2%)
- Related ETFs: MORT, MORL
Tuesday, Dec 102013, 5:33 PM
Tuesday, Dec 102013, 5:33 PM| 3 Comments
- Rising interest rates have killed refinancing - eliminating prepayment risk - and home prices continue to move higher, a particularly bullish cocktail for non-agency MBS, says Gundlach (DBL, DSL), who finds those securities vastly more attractive than high-yield paper (HYG, JNK).
- Asked about Annaly (NLY) - an owner of agency MBS - Gundlach says he likes it and likes its management, but won't be buyer until after the dividend is cut to something more in line with what core earnings might be.
- "Something for Nothing" slides and webcast
- Non-agency MBS players include: MTGE, MFA, DX, TWO
- Related mREIT ETFs: REM, MORT, MORL
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC, SHYG
- Previous: "Freaking out" about interest rate risk
Wednesday, Dec 42013, 2:41 PM
Wednesday, Dec 42013, 2:41 PM| 1 Comment
- Talked about during its last earnings report in October, American Capital Mortgage (MTGE +0.5%) has purchased mortgage servicing company Residential Credit Solutions for an as-yet undisclosed amount.
- MSRs provide a new business line for MTGE, and also a natural hedge to the firm's ownership of long-duration mortgages as MSRs have negative duration - they go up in value as interest rates rise (cash flow is more stable as prepayments fall).
- Press release
Monday, Dec 22013, 3:48 PM
Monday, Dec 22013, 3:48 PM| 48 Comments
- There's no mercy for the mREIT sector (REM -1.6%) as this morning's strong economic data sends the 10-year Treasury yield five basis points higher to 2.80%. Among the new 52-week lows today are sector giants Annaly (NLY -1.6%) and American Capital Agency (AGNC -1.8%).
- Also down sharply are Armour (ARR -2.4%), CYS Investments (CYS -2.4%), Dynex (DX -2.5%), American Capital Mortgage (MTGE -2.8%), AG Mortgage (MITT -2.4%), and Arlington Asset (AI -3.1%).
- Management matters, and investors have clearly lost some faith in the leadership of Annaly and American Capital - both of which trade at more than 20% discounts to book value. The newest favorite is that of Ellington Financial (EFC), where management has mostly been able to preserve book value this year. Company structure may have helped too - Ellington is a partnership, not a REIT and has somewhat more flexibility with its portfolio. The stock trades at just a 6% discount to October 31 reported book.
- ETFs: MORT, MORL
Saturday, Nov 302013, 9:42 AM
Saturday, Nov 302013, 9:42 AM| 71 Comments
- "People are absolutely freaking out about interest-rate risk," says Jeff Gundlach, sitting down with Robert Shiller to size up the investment landscape. Ever the contrarian, Gundlach suggests last year's 1.4% low in the 10-year Treasury yield could still get taken out. The catalyst? "You never know until after the fact; otherwise, it would be priced in the market. But there is no inflation."
- The see "freaking out" in a picture, check out the price charts of the mortgage REITs, particularly the two proxies for riding the long end of the curve - Annaly (NLY) and American Capital Agency (AGNC). Gundlach: "You can take advantage of pockets of opportunity in what people don't want ... If you're willing to take the interest-rate [risk], you can get yields of 11% in the agency mortgage market."
- Constructive on housing (but not homebuilders), Gundlach is also bullish on non-agency mortgage paper, calling it the cheapest sector in fixed income on a risk-adjusted basis. Fans of also beaten-up non-agency mREITs like American Capital Mortgage (MTGE), MFA Financial, Dynex (DX), and Two Harbors (TWO) may want to take notice.
- Mortgage REIT ETFs: REM, MORT, MORL
- Long-duration Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, ZROZ, SBND, DLBS, VGLT, UBT, TLO, LBND, TENZ, TYBS, DLBL
Friday, Nov 222013, 3:11 PM
Friday, Nov 222013, 3:11 PM| 12 Comments
- A nice backup in rates (the 10-year Treasury yield is off 4 bps to 2.75%) is of no help to the mortgage REITs (REM -0.3%), with sector kingpins Annaly (NLY -1.4%) and American Capital Agency (AGNC -1.2%) both hunkered down (NLY earnings call, AGNC earnings call) for the Fed taper, and both hitting 52-week lows today.
- Earlier this week, AGNC and MTGE CIO Gary Kain took his case all the way to Asia at the Citi financial services conference in Hong Kong (transcript). Yes, book value has been hit by higher rates, but also by how much the market is willing to pay for it. Whereas AGNC traded at an average of 110%-120% of book over the past 4-5 years, it's now at sub-90%.
- Discounts can last for awhile, he admits, but also reminds this isn't some opaque bank balance sheet, but instead an easily valued, highly liquid portfolio of assets trading at $0.85-$0.90 on the dollar. As long as it persists, American Capital will continue selling MBS for $1 and buying back stock at a discount.
- Previous: Kain makes a similar case
- Related ETFs: MORT, MORL
- Other sector stocks: Armour (ARR), Two Harbors (TWO -0.8%), CYS (CYS +0.1%), AG Mortgage (MITT -0.5%)
Thursday, Nov 142013, 8:36 AM
Thursday, Nov 142013, 8:36 AM| 11 Comments
- Gary Kain's co-chief investment officer at American Capital Mortgage (MTGE) - Jeff Winkler - has resigned from the company, effective yesterday.
- The entire mREIT (REM) industry has struggled this year, particularly MTGE and cousin American Capital Agency (AGNC), which - for the moment - have given up the management premiums they used to enjoy.
- SEC Form 8-K
Wednesday, Nov 132013, 3:57 PM
Wednesday, Nov 132013, 3:57 PM| 9 Comments
- When agency mREITs trade at discounts to book value, it's a lot different than a bank or insurance company trading at a discount, says American Capital Agency (AGNC +1.6%) CIO Gary Kain, speaking at the BofA financial services conference (transcript) (slides). Why? Because the assets held at an agency REIT are fairly easy to mark, and they're easy/liquid to trade. The benefit of selling mortgages and buying back stock is pretty clear.
- "We stressed on our call that we ... clearly believe that we should be buying back stock in an environment such as this and taking advantage of the liquidity of our assets ... We will continue to pay a lot of attention to the ability to monetize price to book discount," not just at AGNC, but at American Capital Mortgage (MTGE +0.5%).
Friday, Nov 82013, 9:51 AM
Friday, Nov 82013, 9:51 AM| 8 Comments
- Sharply higher interest rates has a number of mREITs (REM -2.4%) hitting new 52-week lows. Most of the stocks were already on the defensive over the past few sessions following near-universally disappointing Q3 results.
- Annaly (NLY -3.3%), American Capital (AGNC -2.9%), (MTGE -2.5%), Armour (ARR -3.7%), Invesco (IVR -3%), CYS Investments (CYS -5.3%), Hatteras (HTS -3%).
- Other related ETFs: MORT, MORL.
- Earlier: Big beat on jobs number sends Treasury prices south.
Thursday, Oct 312013, 11:40 AM
Thursday, Oct 312013, 11:40 AM| Comment!
- The company has agreed to buy a mortgage servicing firm as it tries to get into the business of buying up the MSRs being offloaded by many banks. CIO Kain tries to keep expectations in hand, noting the massive bank MSR sales most have been expecting have yet to materialize. Kain reminds MSRs have negative duration - their value increases as rates go higher - meaning American Capital (MTGE -1.3%) can reduce hedges as it picks up servicing assets.
- Why buy MSRs instead of just adding I/O assets (which also have negative duration), asks a conference call participant. I/O's are generally far more expensive, replies Kain, as anybody can buy the paper, but barriers to entry in the MSR space are far higher. Also, the supply of I/Os is far more limited than that of MSRs.
- Q3 results.
- Presentation slides.
Wednesday, Oct 302013, 4:21 PM
Wednesday, Oct 302013, 4:21 PM| Comment!
- Book value of $22.37 per share is off 1.1% from $22.63 at the end of Q2 and compares to today's close of $19.42, putting the shares at a 13.2% discount.
- Net interest spread of 1.77% is off 17 basis points from 1.94% in Q2.
- $7.7B portfolio down from $8.8B at end of Q2. 5.7x "at risk" leverage vs. 6.4x at end of Q2. Agency securities of $8.4B, $900M non-agency, and $1.6B net short TBA mortgage position.
- 3.2M shares repurchased - 5.7% of the float - at average price of $19.58 each. Compares to 2.9M shares repurchased at average of $21.34 in Q2.
- CIO Gary Kain: "The non-agency market can be characterized by light supply and continued improvement in prices. On the agency side, consistent with our market outlook, we further repositioned the portfolio away from 30-year MBS and into more 15-year securities and ARMs."
- Conference call tomorrow at 11ET.
- Press release.
- MTGE +0.8% AH.
- View all 8 replies
Tucker Leppa:: Yea I decided to sell my ANH and picked up more cys at 7.77 today
- View all 7 replies
William Packer:: Bond market rallies on 10b taper news.
Cash King:: Yeah. It did. I was wrong as well. I'm loving today. mREITs good and other fire hot sales on good companies.
- View all 15 replies
William Packer:: If you can pick up some MTGE around $18.50 or less that is another solid value play. But i wouldn't pay today's prices.
COBeeMan:: Thanks for you insights! I'm watching CHMI for when the rate spread starts to rise. Watching MTGE too but will probably not jump in soon.
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Tucker Leppa:: It means they had such a great year they knocked the lights out :)
Tucker Leppa:: The proper grammar would probably be lights-out.
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William Packer:: Short 2 contracts @ 123'060 on 10s.. I think data next week pushes us deeper into 3s.
William Packer:: i dont know now. the data looks like the bar was set pretty high at least for monday. so monday might be weaker than expected.
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William Packer:: yeah.. what about them?