Quote: "US MBS: The MBS team at Nomura, in a research report, estimates that the
real-estate-investment trust American Capital Agency Corporation (AGNC) sold
about $7B agency MBS from the beginning of the second quarter through June 7.
Nomura made use of the company's 8-K data filed with the SEC last week. Using
this information, and acknowledging the fact that each REIT is different, Nomura
suspects that all mortgage REITs put together sold about $20-25B agency MBS
during the recent backup in interest rates and widening of MBS spreads. Nomura
also acknowledges that AGNC could have bought some of those MBS back during last
week's MBS tightening."
I'm not sure what this means because I don't know what was the purpose of the sale and what was the outcome of the sale. What were they trying to accomplish and did they make or lose money as a result? I'm not sure how to interpret this as to whether it is good news, bad news, or just business as usual.
They had to sell to reduce their leverage. Also, by realizing losses hey can reduce taxable income and be able to cut the dividend to conserve cash. When the value of securities you own in a highly leveraged portfolio goes down, you must sell to reduce leverage, just like getting a margin call in a brokerage account.
The news suggests that AGNC, and perhaps other mREITs, were in front of the price declines that occurred during the last six weeks. That would help explain the fact that there haven't been dividend cuts among AGNC competitors.