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American Capital Agency Corp. Message Board

  • onion1273 onion1273 Nov 15, 2012 8:26 AM Flag

    Mortgage REIT Volatility ‘All to the Downside’: Wunderlich

    By Felice Maranz
    Nov. 15 (Bloomberg) -- Under current mkt conditions, buy
    only small positions, scale in over time, as volatility “all to
    the downside,” unlikely to abate before yr-end, Wunderlich’s
    Merrill Ross writes in note.
    • Accelerated downward momentum yday may signal retail, some institutional, investors capitulating
    • “Impossible to break through the wall of worry” about economy, admin, FOMC moves
    • Book value, dividends under pressure because agency RMBS down since end-Sept. as lower interest rates likely to trigger higher prepayment speeds in many collateral pools, lower mortgage rates support lower returns on reinvested principal
    • Focus on yield vs price/book; buy-rated cos. with highest yield most oversold
    • Top picks: Western Asset Mortgage, American Capital Agency, American Capital Mortgage
    • 4Q dividend declarations may be catalysts; outlook likely to stay “unclear” through 1Q
    • Sees “further tweaks” to HARP centered on principal forbearance; widespread principal forgiveness unlikely
    • Sees monetary policy effective at lowering mortgage rates; even so, some borrowers won’t have refi option until employment improves, home prices rise
    • NOTE: Nov. 13 FBR wrote Annaly’s Crexus buy acknowledges the “QE3-induced” vise it’s in is likely to continue “for the foreseeable future”

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