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American Capital Agency Corp. Message Board

  • dr_klumps dr_klumps May 4, 2013 12:07 PM Flag

    MBS prices plummet, rates rise.

    Looks like more of the same for the second quarter, I think the low rate environment is coming to an end. Maybe time to short. Below is the MBS report for Friday. I think if you invest in M-REIT's you have to watch MBS pricing trends, you could have shorted a month ago, it was clearly obvious, prices were dropping and when you are leverage 8-10 to 1, any slight drop is magnified 10 fold. I could see another 2-3 $ loss in BV 2nd quarter and another 2-3 $ loss in BV the 3rd quarter, for potential $6 drop from $29. AGNC was trading nears its upper limits after its IPO it went from $8 to $36, I could see this cycling down to high teens low 20"s and leverage getting reduced to 3-4.

    A weak economy contributed to low mortgage rates between 2009-2011. In makes sense, then, that mortgage rates should rise when the economy moves to recover.

    Immediately following the release of today's jobs report release, mortgage markets sold-off. Within seconds, mortgage bonds moved enough to send rates +0.125 percent. This happened because strong job growth supports broad economic growth, which makes Wall Street feel better about "risk".

    Bond markets represent "safety". When Wall Street chases risk, rates often rise.

    FHA mortgage rates, conforming mortgage rates, and jumbo mortgage rates are all higher today and are expected to remain elevated over the next week, at least.

    If you're actively shopping for a mortgage, it may be prudent to ask your bank for a mortgage rate commitment.

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    • will the entire REIT sector plumment in the next two weeks - its at all time highs right now and how much will the correction be in the REIT group? usually news like this sends the entire sector down in a swift 2 week movement before it settles at a lower base.

      question with this market the way its been going - will they rotate out at all?

      • 2 Replies to munhoi
      • They could rotate to cash to protect from principle loss. I owned a huge position of CIM when they announce earnings miss and dividend cut. The Stock was at a high $4.28 then dropped to 4.22, then $4.12, 4.16, it went all over the place. I got out within hours my full position prices from $4.16 -$4.22, I didn't get the highs, but I was lucky a few days later this was mid $3.50 and a quarter later down to $2.00. I rotated to cash and traded options to make cash flow, it is just like interest but you work and sweat for it, you really earn it, not sit passively and wait for the divy and take the risk of bad news that could steal you principle.

      • bowhunterron May 4, 2013 12:34 PM Flag

        That is the question, if they rotate out of this sector, where will they rotate to. This msg board is full of folks saying the end of mtg reits is in sight. I think this miss by AGNC is being way overdone by folks who are short or hoping to buy very cheap. Mtg reits will be over when we have a sustaining rise in interest rates and or QE stops. This miss was due to TBA roll financing that had a rise in interest rates and went right back down. It is already self correcting. This all comes down to, Do you trust Gary Kain and team. I do,I believe they are being truthful with us. Bow

18.43+0.28(+1.54%)May 4 4:00 PMEDT