Here are some Q2 BV projections:
- TWO -- BV down 2%, helped by strong hedges in particular swaptions, as well as substantial IO and some IIO positions. But given where it trades now, representing roughly 10% of discount to that projected BV, there is no particular axe. The numbers will be released after close today.
- AMTG -- BV down 13%, suffering from a significant drop on agencies, no help from swaptions (too few too short), some help from swaps and expecting a small decline on non agencies. At a 12% discount to BV this would lead to a 7% gain in price. Numbers to be released after close today.
- MITT -- BV down 7%, helped by IO positions (rather than inverse IOs), swap hedges, and limited value declines in non agencies (with some short ABS paper, some short duration RMBS etc). At a 12% discount this would imply a stock price around 19, ie a gain by 8.5%. But if indeed the drop is single digit, the stock would likely have an extra kick. Numbers to be released tomorrow morning.
So while both AMTG and MITT would probably make sense I'm just very long MITT for the time being.
Disclosure: I am long MITT.