Question is : what will be the yield of these mREITs once interest rates normalize.
If interest rates goes back to 4-5% (hypothetically) w/o the Fed suppression of interest rates, will the mREITs be higher still than for ppl to park their money into CDs instead.
Baby Boomers would much rather park their money in a safe CD, than go therough market gyrations ww/o security of their principle. They are forced into the market searching forr yield because the Fed bond buying to lower interest yield.
QE1 was announced and agency REITs had higher book values and lower profit.
QE1 ended and agency REITs became more profitable, with soft book values propped by hedging.
QE2 was announced and agency REITs had higher book values and lower profit.
QE2 ended and agency REITs became more profitable, with soft book values propped by hedging.
QE3 was announced and agency REITs had higher book values and lower profit.
Fill in the next line.
The only concern is if interest rates SHOOT UP quickly on the low end of the interest curve. That did not happen for QE1 or QE2, and scaling back on QE3... GRADUALLY... over the next several meetings, will not result in interest rates shooting upward. In fact, it's a perfect recipe for great spread income.
Everything in REITs has a good and a bad. Ultimately, REIT longs want QE nonsense to stop so the companies can operate in a more consistent environment without the higher risk of 'shock quarters' due to market whipsaws. We want book value to build, over time, outside of QE rather than guess what book value might be based on how people 'feel' about interest rates.
warlord_shea, with AGNC and MTGE. It looks like they will get spanked again on the TBA's.
MBS prices are falling to much in one quarter.
Unless prices go back up I think it will be a gloomy quarter again on the taxable income front.
Since you're more financially literate than I am Warlord, you said it better than I could. The informed Investor in REIT's is actually praying for an end to QE. I hope you re-post your comment in 'New Topic'.