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New York Mortgage Trust Inc. Message Board

  • jimbollini jimbollini May 28, 2013 12:01 PM Flag

    Going to drop?

    Seems that the big boys: nNLY AGNC have fallen from grace. Any reasons for NYMT holding up? Thanks

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    • The Mreits are all about earnings and increasing book value. Before you invest in NYMT or any other Mreit you should read what is in the portfolio.. NYMT will do well in an increasing interest rate environment as they are well diversified and not weighted on fixed rate mbs. ( Although they do have fixed rate mbs in the portfolio ). This is why NYMT was able to post a gain in book value Q over Q vs the others you mentioned lost value.

      The ones you mentioned will suffer as the bonds they hold will drop in value as interest rates increase and reduce book value materially. They are getting hit hard today but this is just the start of the decline for them.. Why would you want to own a stock when the value of their portfolio will drop as interest rates rise? The Fed will either reduce or stop the bond buying so who will be around to keep the value up. Uh.. Nobody!!! The existing bonds will have to be held until maturity and with rising interest rates they are locked into a lower yield. This means dividend cuts.. so now you have heavy volume in both AGNC and NLY.. Big boys are getting out..

      • 1 Reply to sho261
      • mintwaxed115 May 28, 2013 3:26 PM Flag

        I might add that there has been no talk of raising interest rates, short or long, during the last FMOC meeting of May 1, 2013. Below is the third paragraph of the minutes. The entire statement can be had at the Federal Reserve web site. For 2013, FMOC meetings are in Jan, Mar, May, Jun, Jul, Sep, Oct, and Dec.

        "To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."

        Also, viewing the Treasury Yield Curve, the 1 month is currently .03% and the 30-year 3.18% as compared to 3.04% in January. So, the long end has crept up by 0.14% but not due to any change in QE policy.

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