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American Capital Agency Corp. Message Board

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  • yourbestfriendintheworld yourbestfriendintheworld Jan 14, 2011 10:50 AM Flag

    Why not Treat this like an Annuity?

    >Because when interest rates begin to raise, both income and principal will be gone.

    Really? Do you know what swaptions are?

    If this company is using them the way it's been reported, a rise in rates will actually improve income from swaptions, while they have no downside other than the premium already paid on them.

    Income from mortgage paper will continue until the mortgages are paid off.

    There won't be as much opportunity for high-spread acquisition, but then they can just stop doing that. The cash and income will still be there.

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