Shares in AGNC Investment (NASDAQ:AGNC), Annaly Capital Management (NYSE:NLY), and Armour Residential REIT (NYSE:ARR), along with most other residential mortgage REITs, climbed strongly in Thursday trading as bond markets rally.
The 10-year Treasury yield has dropped almost 8 basis points on Thursday dipping below the 4% mark. Caxton's Michael Brown observed that demand for the 10Y note has increased due to investors pricing in a slower pace of Fed rate hikes combined with some haven demand.
iShares Mortgage Real Estate Capped ETF (BATS:REM) is up 2.7% in midday trading.
In bond markets, yields drop when bond prices rise. REITs that invest in mortgages will benefit as bond values increase. For AGNC (AGNC), specifically, SA contributor Gary J. Gordon sees a big upside for the stock as he expects the bond bear market is nearing its end. "If so, AGNC's book value and assets should start rising," he wrote.
On Monday, AGNC posted better-than-expected Q3 earnings as its hedging and repositioning helped it to weather the slumping bond market. Its stock is up 2.8%.
Other stocks making gains include: Chimera Investment (NYSE:CIM) +3.5%, Two Harbors Investment (NYSE:TWO) +3.6%, Orchid Island Capital (NYSE:ORC) +2.4%, and New York Mortgage Trust (NASDAQ:NYMT) +4.0%.
Earlier, long-term mortgage rates cross 7% mark for the first time in more than 10 years