Mortgage REITs can’t seem to put together an uneventful day lately, and they’re getting hit across the board Monday. Shares in mortgage REIT American Capital Agency Corp. (AGNC) are down 4.7% to $28.63, while Annaly Capital Management (NLY) is down 2.6% to $14.66. MFA Financial (MFA) is down 0.9% to $9.10, and Two Harbors Investment (TWO) is down 1.6% to $11.91 and the iShares FTSE NAREIT Mortgage PLUS Capped Index Fund (REM) is down 2.2% to $14.91.
The weakness comes after the Wall Street Journal‘s resident Fed-watcher Jon Hilsenrath published a story over the weekend (which had been rumored to be in the works since late last week) outlining the Federal Reserve’s efforts to map an exit strategy from quantitative easing. An excerpt:
Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated.
The Fed’s strategy for how and when to wind down the program is of intense interest in financial markets. While the strategy being debated leaves the Fed plenty of flexibility, it might not be the clear and steady path markets expect based on past experience.
Recently regulators had flagged mortgage REITs as a possible bubble growing amid such friendly Fed policy, and any end to that policy could prompt a pullback in the sector.