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Annaly Capital Management, Inc. Message Board

  • luv_reits luv_reits Aug 26, 2005 7:21 AM Flag

    2/10 spread now 16 bps.

    In your mind's eye, can't you just see Mike Farrell right now? He's watching his margin disappear, his ARM portfolio get refinanced out from under him with fixed rate mortgages and his dividend steadily heading lower. Can't you just feel the sweat dripping off his brow as he's reading the WSJ this morning, drinking a cup of coffee and cussing out Alan Greenspan in Jackson Hole, Wyoming?

    JP Morgan was $5 later than me in calling for a sell. But, they will be $5 earlier than those who wait until $10. The long term chart shows what can happen to this stock when the yield curve flattens/inverts. You still have time to get out though.

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    • Everyone refers to the 2/10 this just a statement of how flat the yield curve is becoming? Don't these mortgage REITS borrow at about a 90 day rate and the newly purchased mortgages have interest rates that track the 10 year rate...if thats the case then their NEW BUSINESS spread(before prepayment risk) is the difference between these two rates isn't it? Now I realize that the average spread is lower because of the delay in rate resets.

      I understand that the market value of the ARM's in a portfolio tracks the 2 year interest rate because of the prepayment this correct?

      I am watching MFA because I think its a better deal than NLY...however its still too early to get in!!

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