Crocodilian

American Capital Agency: Making Money the Old-Fashioned Way

AGNC is an interesting company. I'm a longtime Annaly investor, so I'll just highlight two apparent differences. First, AGNC is much, much smaller ($300MM market cap) and has bought its entire portfolio in the last few months. Second, and this is an important one, they've made a bet on prepayment speeds of higher coupon mortgages (basically, in most environments higher coupon mortgages refinance quickly, because borrowers can save money by doing so). There are some good reasons for this bet, but its worth understanding that it could go wrong. Basically, my reading is that the harder it is for consumers to refinance, the better AGNC's current strategy will do.