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American Capital Agency Corp. Message Board

  • terroir2 terroir2 Aug 25, 2011 9:48 AM Flag

    Refinancing Plan: The Guerrilla in the Room

    My guess it is not Bernanke but Obama that is the source of the REIT market weakness:

    Seems the administration is actively considering a massive plan to allow consumers holding GSE mortgages to refinance at lower rates.

    Obviously a major concern to MBS bond holders, of which the REITs are major players with significant exposure to repayment.

    I have no indication of whether or how this massive impact would be mitigated on bond holders, perhaps they will simply be collateral damage in a clear vote winning play.

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    • Hi Reits,

      That's my average for the 260 contracts, after three sells during July August I have moved my average cost down considerably from the $4.5 I paid originally after the SPO.

      I have done much better with the Jan12's than the Jan13's, the latter seem much more resistant to price drops. The breakdown is:

      25Jan12 110 contracts average price $2.76
      25Jan13 150 contracts average price $3.80

      The average cost was driven down by a series of sells and repurchases at lower cost. I think someone called it BATESAT (LOL).



    • Yeah, that was my avg today. I was referring to your total 220+ avg for the 25's or did I read that # wrong?

    • Hi Doc,

      My average is $3.348, but it seems to me had I bought them all this morning at $3.20 I would be better leveraged. That's a lot of hard work to be in about the same place. I tried for 100 today but only got 60, 50 at 3.4 and 10 at 3.3. I have to stop, but once I had done my due diligence on the NY Times article I was hooked again.



    • Doc,

      You are referring to the Jan 12 25's, right? If so, what advantage do these have over the Jan 12 27's?

    • Pretty impressive Terr!

      What is your average for the 25's. Mine is 3.61 so far. Paid too much yesterday. Missed it by one day....

      Might be 3.30 average B4 it's over ;-)

    • I think you are dead right doc, picked up more today, though I missed the lows trying to get confirmation that this was bull crap.

      Have you noticed how high the premium on the 25's is? I recall last quarter or the one before that when we were able to buy the 25's at 10 cents above intrinsic; at the $3.4 offered now the price is 64 cents above intrinsic and would probably need $3.5 to bag. Have to blame it on increased volatility, in those days we had volatility at 15% even though the cycle range was pretty much the same. Right now I am up to Batesat 6.75 ( four fills and three sells) this quarter and the truck is overflowing with 260 25's at various expiry dates and fill costs from $4.2 which looked cheap a week ago to as low as $3.30 today.

      September should rock.

      Another good thing, at these levels chance of spo very low and the closer the upward correction is to exdiv the less chance of a dividend sharing spo. Sets up nicely for a post dividend & post spo call strategy, or even pre dividend bought puts.


    • lol, thanks :)

    • Pretty funny! LOL

    • thanks doc, gotta love breakeven at 20% yield with 5 chances to win and BV increasing 80 cents/q. I know we're in a new bear market according to Dow Theory but I couldn't resist.

    • Good eye, you know me well then Jim, 1st but $3.20, then bought more at $3.30 today too.

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