Mortgage REITs mull inverted curve, possible refi wave

|About: AGNC Investment Corp. (AGNC)|By:, SA News Editor

Tumbling rates at the long end of the curve have put a big hurt on the mREIT industry this month.

The 10-year Treasury yield is down to 2.17% at current writing vs. 2.52% at the start of May. The current Fed Funds rate is 2.39% (target range is 2.25%-2.5%), and - with the exception of the 30-year long bond - the entire Treasury curve is trading below that level.

An inverted curve not only puts pressure on the profits of levered carry players, but the plunge in mortgage rates portends a possible refinance wave, and another hit to profits.

The VanEck Mortgage REIT Income ETF (NYSEARCA:MORL) is down 1.05% today and about 6% for the month.

Annaly Capital (NYSE:NLY) is down 11% in May, New Residential (NYSE:NRZ9%, AGNC Investment (NASDAQ:AGNC7%.


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