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  • gcmorgan_98 gcmorgan_98 Mar 14, 2012 11:58 AM Flag

    Question about rates

    Refinances will be reduced. This reduces the premium amortization impact on the MBS interest rate. Net positive.

    Book Value would decrease. Not much of an impact when NLY has such a low leverage rate.

    IMO....Long rates going up and short rates staying the same.....Great news for NLY.

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    • davesmith49 Mar 14, 2012 7:07 PM Flag

      I held the stock for someone else 7-12 years ago, and followed it closely back then. Back then they were really struggling with a narrow spread, even an inverted yield curve, but they always managed to post a great dividend somehow. This company is extremely well managed. Solid fixed income was a great thing in recessions. They never disappointed. Seems to me like we're entering a Goldilocks setup for NLY. The spread should widen nicely. And it's coming back to me about the refinancing risk, like you said. I remember them talking about refinancing hurting them as rates fell. I'm sure that will lessen now.

      I'm sure NLY is a buy right now, the question is, who will buy? I'm up to my neck in BAC. I think NLY is just playing second fiddle for the time being. Some people probably sold out and got in banks before the results of the stress test. I know I did with some other perfectly good stocks. But those of you holding for divs should be in great shape, much better shape than when I held it for years. Thanks for the reply and good luck!

    • If NLY does not increase their leverage or SPO how can they take advantage of better spreads? 3 billion of cash disappeared from last quarter's balance sheet. Refi may hit distributable income and we may see a hard hit in the divy. I hope management can show us something different. JMO


      Trying to determine why mREIT has gone down today, not just NLY - see the above link if that could be the reason.

      Next 3 to 6 months NLY will be trading flat with 17 the ceiling. The floor - 15.75 and above.

      Just my 2 cents.

      NLY might be the biggest in $$$ size, and not as nimble as the smaller caps.

      One always wants to buy at the lowest price as much as possible.

      • 1 Reply to joetong419
      • I've been scratching my head today also as to why mREITs are down. My muni's are down an equal amount so it could simply be money moving out of these sectors into the equity rally.

        Bond rates have spiked up as well. Curiously the spread between short and long term has actually expanded, which is a positive for mREITs.

        Just looked at MBB which tanked today, so that could be why mREITs declined. FWIW this from WSJ today:

        The selloff in Treasurys and mortgage-backed securities over the past five trading days is beginning to touch off fears that the rise in yields could accelerate as banks shed MBS that offset refinancing when rates are lower.

        Mortgage banks that service loans typically own large portfolios of MBS that would hedge the falling value of their income streams when interest rates drop, and refinancings rise. Conversely, a rise in rates harms prices of those MBS that are backed by loans with low coupons, which can quickly fall out of favor when market rates rise.

        The phenomenon of "servicer selling" hasn't yet kicked in, partially because the rate rise so far won't heavily affect the level of refinancing that has been mostly dependent on availability of credit. But MBS trading desks are intensifying their watch due to the snowball effect that such selling has caused in the past.

        The concern has come as a run of stronger-than-expected U.S. data and a brightening Federal Reserve view of the economy sent 10-year Treasury yields soaring by 35 basis points over the past week, marking the most rapid increase in the benchmark rate since October. Rising Treasury and MBS yields will both affect consumer mortgage rates.

        "If the 10-year yield continues to break through critical levels, that could really trigger servicer shedding of duration and cause a more pronounced selloff," said Kevin Jackson, an MBS trader at Wells Fargo Securities in Charlotte.

        MBS paying the lowest rates of interest have sharply underperformed Treasurys. The yield on Fannie Mae's current coupon soared 20 basis points on Wednesday to 3.17%, the highest since Dec. 6, according to Credit Suisse's Locus analytics.

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