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Two Harbors Investment Corp. Message Board

  • sonnenwayne sonnenwayne Jun 24, 2013 7:24 PM Flag

    Today's volume: Subprime bonds down 3.7% this month

    See article titled: "Mortgage-Bond Auction Failures Reach Most in 2013 as Prices Drop."

    Per the article, Bonds backed by the riskiest subprime mortgages issued to borrowers with poor credit before housing collapsed have fallen 3.7 percent this month, trimming their gains this year to 7.6 percent, Barclays index data show.

    The agency portfolio is probably down as much as any other mREIT; however, according to TWO's presentation early this month, they said (at that time) that their book value had not changed since March 31. As of the June presentation, TWO was short $2.5 billion in TBA MBS -- which should help maintain book value.

    Nevertheless, 17 million shares traded today tells me that people are selling on headline news and not looking into this deeper.

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    • SHORTIE!! Wow bunch's to IGNORE on this one

      • 1 Reply to proginov
      • I've been long TWO for a number of years. I was posting what I thought was one possible explanation as to why TWO's pps fell so hard last week. TWO's BV rose by several dollars per share because of its subprime bonds. Speculation of a pre-mature exist from QE3 caused yields on the 10Y treasury to spike from 1.8% to 2.6% very quickly; as a result of that, the valuation of some of TWO's subprime bonds would have taken a hit. The end of this quarter is June 31, and it's very possible that TWO's BV remains unchanged from March 31. The short position on the TBAs will help as mortgage rates on 30Y fixed stuff are now near 4.5%; that's a huge change from the 3.5% when they took the short positions. (I doubt that they'll hold the short TBA position for too long.)

    • sonnenwayne, your insights are much appreciated.

    • This appears to be a market related issue, supply/demand. The fundamentals in the housing market seem to be improving. Wouldn't be surprised to learn that TWO is in this market buying.

    • i think this has to do with upcoming ex-dividend June 26

    • sonnenwayne;
      Thanks for the information. Yes, people are selling on the headline news and reacting to noise rather than reason. We seem to go through this kind of market at lease once or twice a year. It's a good time to go out and play some golf or better yet, go on a vacation where there is no internet, rather than worry about what is happening this minute or this hour in the markets.
      I am an income investor and as such am not as concerned about BV as I am about NII which I see increasing as we move forward.
      Again, thanks for the article.

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