So the DRIPed shares may or may not add to the total amount of shares of AGNC,and will be done so at AGNC's discretion. The pps of AGNC at the time of payment would seem to dictate whether to create more shares(if the pps were pricier) or to buy back shares for the DRIPer(if the pps were cheaper). That's neat. We are currently about in the center(imo). What would you do, if you were them, tomorrow? On Friday we should see a change in the amount of shares of AGNC, giving us all the answer as to what management decided.
seriously newbie ... mgmt is not EVER going to tell you that they are contemplating an SPO. The question sometimes gets asked and is sometimes addressed 'around the edges' i.e. - whether it is currently, or what would be, a favorable environment for an SPO - but mgmt will usually sidestep the issue entirely even if asked. Today the topic wasn't broached. I don't think many feel that we're in a good environment; most are just trying to buy new mbs on the margin to keep up with runoff and prepays etc. in order to maintain current leverage. That's why gov't policy is so stupid. The more they talk about QE3 and buying new mtgs etc. the less attractive mbs purchases become to the private sector - which forces the Fed's hand to come in and be the buyer of last resort, because the private sector doesn't want to participate.
If they just let spreads expand a bit - the mkt will find equilibrium and the private sector will fill the vacuum and create equilibrium ... until the SEC or some other policy maker comes out and starts complaining about the private sector making too much $$ - which then forces the gov't to be the ONLY provider of the commodity/service. Cue the calls to nationalize the oil and gas industry ala Mexico and Venezuela ... and see where that gets you. It's a fricking joke ... but it's the reality we live in.
No, the government/Fed are smart, here. They know they're getting 0-0.3% on loans to agency mREITs to buy MBSs. So they're cutting out the middleman and taking the full interest on the MBSs themselves.
The agency mREITs are seeing this competition lowering their spreads, and backing off, leaving MBS prices low for the Fed. The Fed can now buy at any rate it wishes, controlling the prices itself.
Agency mREITs have only to buy enough to replenish their income, which is being depleted by refis and other reductions in asset levels, to keep their net profits a constant. This will work until they deplete their cash, if other sources of income aren't sufficient. That's when the SPO will have to happen. The alternative is to sell off lower-performing MBSs to get cash. Or go to Vegas and bet it all on black.
None of the REITs I've payed attention to have had a spo in a few months. Won't the lack of money infused in this sector help hold down demand for MBSs and thus prices of MBSs? If AGNC had a spo here, didn't sell as many shares, and didn't give as big of a discount for them, wouldn't that maybe be a wise move for AGNC. They would be one of a few with "new money" availible to purchase more "paper". Fewer shares sold would be less shares to which to pay dividends. A smaller discount for the shares would negate the necessity of waiting for a higher run-up in order to make the spo worthwhile. Having a spo now would give AGNC more time this quarter to infuse the new money and make the new shares accretive. Many investors here are waiting to buy after a spo that may not come this quarter. It seems as though AGNC is in a dead zone: Too high to buy, too low to sell. A spo here with a smaller discount would spur new investing and provide AGNC the money with which to further help pay future dividends(1st qtr. 2012). A spo here(with less shares offered at a smaller discount) will keep the ship sailing as smoothly as it has in the past.