We're near the end of the AGNC price adjustment. Investors are becoming more comfortable with the end of QE, and are realizing that the Fed will not allow bond prices to change sharply. A poorly administered end to QE could put the economy in worse shape than if QE had never occurred, and the Fed realizes that. So for the time being, the Fed will be manipulating market bond prices, softening the rate of adjustment that bond holders will be forced to make. It's not the magnitude of the interest rate adjustment that's important, its the amount of time it takes to get there.
I think raybans2 is right. Book value should be the bottom.
This move, quite frankly, is totally illogical. The Fed getting out of the bond buying business would be a GOOD thing for the REITs.
All we heard for months was how bad QE3 was for the REITs because the Fed's bond buying program kept rates artificially low and created an environment where (1) early redemptions could become a problem as lower rates gave people the opportunity to re-finance; and (2) the interest rate curve was flat, which made it more difficult for the REITs to make money.
The fact that the Feds are planning an exit strategy would be bullish for the REITs. It eliminates the REITs main competitor--the Fed.