Back to business,
OK, so if QE ends , LT rates go up, stock market goes down, but without the fed signalling that they will move the overnight rate, AGNC's spread will widen.
How do we play it? My thoughts here is to dump as employment strengthens. Wait for the whiplash of a stock market correction, then BUYBUYBUY AGNC and other mREITS.
Just a thought.
What do you guys/gals think?
i know, if you read about the participation rate and number of people on disability, you'd realize that rates will be low for a long long time. Also with Japan's QE-nuke, if Bernanke and company see results there, we will be getting alot more QE here....
Forget about rates going up, No wonder all my yieldy reits,MLPs and BDCs are doing well.
a lot depends on just how and when the fed pursues higher interest rates.
lets say for one example, QE is over and that interest rates are starting to tick up to the point where everybody agrees that the fed can only do one thing. they go and raise their target 0.25%. in this case, do nothing. normal REIT churn and repayments will blend the new rates in.
another example. QE is over, and out of the blue they bump it 1%. everything else follows. in this case bail until the dust settles. the spread may increase handsomely, but BV is going to get whacked by something. that depends on portfolio duration at the time.
last example. QE is ending. probably just ride it out. if they end QE, absent a financial reason to do so, it will be because the mortgage market has become self supporting.