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American Capital Agency Corp. Message Board

  • matchmenot matchmenot Jul 10, 2013 1:29 AM Flag

    BLOOMBERG PT. 4 FINE'

    Keep Checking’
    “I keep checking,” said Boston, whose REIT owns more commercial-mortgage bonds than some peers.
    Still, REITs’ sales of mortgage bonds to meet margin calls and maintain leverage have “absolutely been a factor” in the slump in mortgage-bond prices, Hackel said.
    Credit Suisse Group AG analysts led by Mahesh Swaminathan wrote in a July 8 note to clients that higher interest rates could trigger further REIT sales, creating a “key risk” to their recommended bet that mortgage bonds would outperform.
    REITs and other investors that use leverage helped push up bond yields as they sold debt or added bearish bets on Treasuries as hedges, Scott Minerd, chief investment officer of Guggenheim Partners LLC, said in a July 9 note to clients.
    “Rising rates will continue to reduce housing affordability, which is especially troublesome because housing is the primary locomotive of U.S. economic growth,” he said.
    Mutual Funds
    U.S. government-backed mortgage securities account for 29 percent of the Barclays U.S. Aggregate Bond Index, a common benchmark for mutual funds, meaning the debt’s performance can be influential in determining the returns seen by investors, according to data from the bank.
    American Capital and Armour Residential REIT Inc., which target Fannie Mae, Freddie Mac and Ginnie Mae securities have been some of the worst performers. Both slumped more than 30 percent since Denahan’s remarks. American Capital President Gary Kain and James Mountain, Armour’s Chief Financial Officer declined to comment on the companies’ losses.
    “The space has not been getting love,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. “It seems like one way or the other they’ve had fears weigh on valuations. Last fall it was that rates were so low that new investment spreads were not as attractive and investors were worried about earnings and dividends. Now rates have moved up and instead they are worrying about book value.”
    Book Values
    Investors have been overcompensating in selling REIT stocks while preparing for bond prices to fall further, according to Steven Delaney, an analyst in Atlanta at JMP Securities LLC. That’s increased the discounts to net values of REIT holdings, or book values, at which the shares trade.
    On July 5, companies that invest in only government-backed bonds were trading at 88 percent of current book values on average, he said. Whether to buy the shares depends mainly on the direction of mortgage-bond prices, which may be set for new sharp moves as Fed Chairman Ben S. Bernanke speaks today in Boston, he said.
    “It’s kind of a coin flip,” he said. “I’m hoping Bernanke is going to try to calm the market a little bit, but I don’t want to invest on that hope.”
    Analysts are split over whether the worst is over for the mortgage REITs.
    Daniel Altscher, an analyst at FBR Capital Markets & Co. said the group “got undeservedly whacked and from a trading perspective looks attractive in the short term.”
    Merrill Ross, an analyst with Baltimore-based Wunderlich Securities Inc. said this week she didn’t see relative value in REIT stocks for the first time in five years.
    “There is heightened risk that the only way to raise liquidity might be to disgorge bonds at firesale prices,” Ross said in a report this week. “Investors need to be mindful of the potential downside scenarios.”

    Sentiment: Strong Sell

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Keep Checking’
      “I keep checking,” said Boston, whose REIT owns more commercial-mortgage bonds than some peers.
      Still, REITs’ sales of mortgage bonds to meet margin calls and maintain leverage have “absolutely been a factor” in the slump in mortgage-bond prices, Hackel said.
      Credit Suisse Group AG analysts led by Mahesh Swaminathan wrote in a July 8 note to clients that higher interest rates could trigger further REIT sales, creating a “key risk” to their recommended bet that mortgage bonds would outperform.
      REITs and other investors that use leverage helped push up bond yields as they sold debt or added bearish bets on Treasuries as hedges, Scott Minerd, chief investment officer of Guggenheim Partners LLC, said in a July 9 note to clients.
      “Rising rates will continue to reduce housing affordability, which is especially troublesome because housing is the primary locomotive of U.S. economic growth,” he said.
      Mutual Funds
      U.S. government-backed mortgage securities account for 29 percent of the Barclays U.S. Aggregate Bond Index, a common benchmark for mutual funds, meaning the debt’s performance can be influential in determining the returns seen by investors, according to data from the bank.
      American Capital and Armour Residential REIT Inc., which target Fannie Mae, Freddie Mac and Ginnie Mae securities have been some of the worst performers. Both slumped more than 30 percent since Denahan’s remarks. American Capital President Gary Kain and James Mountain, Armour’s Chief Financial Officer declined to comment on the companies’ losses.
      “The space has not been getting love,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. “It seems like one way or the other they’ve had fears weigh on valuations. Last fall it was that rates were so low that new investment spreads were not as attractive and investors were worried about earnings and dividends. Now rates have moved up and instead they are worrying about book value.”
      Book Values
      Investors have been overcompensating in selling REIT stocks while preparing for bond prices to fall further, according to Steven Delaney, an analyst in Atlanta at JMP Securities LLC. That’s increased the discounts to net values of REIT holdings, or book values, at which the shares trade.
      On July 5, companies that invest in only government-backed bonds were trading at 88 percent of current book values on average, he said. Whether to buy the shares depends mainly on the direction of mortgage-bond prices, which may be set for new sharp moves as Fed Chairman Ben S. Bernanke speaks today in Boston, he said.
      “It’s kind of a coin flip,” he said. “I’m hoping Bernanke is going to try to calm the market a little bit, but I don’t want to invest on that hope.”
      Analysts are split over whether the worst is over for the mortgage REITs.
      Daniel Altscher, an analyst at FBR Capital Markets & Co. said the group “got undeservedly whacked and from a trading perspective looks attractive in the short term.”
      Merrill Ross, an analyst with Baltimore-based Wunderlich Securities Inc. said this week she didn’t see relative value in REIT stocks for the first time in five years.
      “There is heightened risk that the only way to raise liquidity might be to disgorge bonds at firesale prices,” Ross said in a report this week. “Investors need to be mindful of the potential downside scenarios.”

      Sentiment: Strong Sell

    • Keep Checking’
      “I keep checking,” said Boston, whose REIT owns more commercial-mortgage bonds than some peers.
      Still, REITs’ sales of mortgage bonds to meet margin calls and maintain leverage have “absolutely been a factor” in the slump in mortgage-bond prices, Hackel said.
      Credit Suisse Group AG analysts led by Mahesh Swaminathan wrote in a July 8 note to clients that higher interest rates could trigger further REIT sales, creating a “key risk” to their recommended bet that mortgage bonds would outperform.
      REITs and other investors that use leverage helped push up bond yields as they sold debt or added bearish bets on Treasuries as hedges, Scott Minerd, chief investment officer of Guggenheim Partners LLC, said in a July 9 note to clients.
      “Rising rates will continue to reduce housing affordability, which is especially troublesome because housing is the primary locomotive of U.S. economic growth,” he said.
      Mutual Funds
      U.S. government-backed mortgage securities account for 29 percent of the Barclays U.S. Aggregate Bond Index, a common benchmark for mutual funds, meaning the debt’s performance can be influential in determining the returns seen by investors, according to data from the bank.
      American Capital and Armour Residential REIT Inc., which target Fannie Mae, Freddie Mac and Ginnie Mae securities have been some of the worst performers. Both slumped more than 30 percent since Denahan’s remarks. American Capital President Gary Kain and James Mountain, Armour’s Chief Financial Officer declined to comment on the companies’ losses.
      “The space has not been getting love,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. “It seems like one way or the other they’ve had fears weigh on valuations. Last fall it was that rates were so low that new investment spreads were not as attractive and investors were worried about earnings and dividends. Now rates have moved up and instead they are worrying about book value.”
      Book Values
      Investors have been overcompensating in selling REIT stocks while preparing for bond prices to fall further, according to Steven Delaney, an analyst in Atlanta at JMP Securities LLC. That’s increased the discounts to net values of REIT holdings, or book values, at which the shares trade.
      On July 5, companies that invest in only government-backed bonds were trading at 88 percent of current book values on average, he said. Whether to buy the shares depends mainly on the direction of mortgage-bond prices, which may be set for new sharp moves as Fed Chairman Ben S. Bernanke speaks today in Boston, he said.
      “It’s kind of a coin flip,” he said. “I’m hoping Bernanke is going to try to calm the market a little bit, but I don’t want to invest on that hope.”
      Analysts are split over whether the worst is over for the mortgage REITs.
      Daniel Altscher, an analyst at FBR Capital Markets & Co. said the group “got undeservedly whacked and from a trading perspective looks attractive in the short term.”
      Merrill Ross, an analyst with Baltimore-based Wunderlich Securities Inc. said this week she didn’t see relative value in REIT stocks for the first time in five years.
      “There is heightened risk that the only way to raise liquidity might be to disgorge bonds at firesale prices,” Ross said in a report this week. “Investors need to be mindful of the potential downside scenarios.”

    • Keep Checking’
      “I keep checking,” said Boston, whose REIT owns more commercial-mortgage bonds than some peers.
      Still, REITs’ sales of mortgage bonds to meet margin calls and maintain leverage have “absolutely been a factor” in the slump in mortgage-bond prices, Hackel said.
      Credit Suisse Group AG analysts led by Mahesh Swaminathan wrote in a July 8 note to clients that higher interest rates could trigger further REIT sales, creating a “key risk” to their recommended bet that mortgage bonds would outperform.
      REITs and other investors that use leverage helped push up bond yields as they sold debt or added bearish bets on Treasuries as hedges, Scott Minerd, chief investment officer of Guggenheim Partners LLC, said in a July 9 note to clients.
      “Rising rates will continue to reduce housing affordability, which is especially troublesome because housing is the primary locomotive of U.S. economic growth,” he said.
      Mutual Funds
      U.S. government-backed mortgage securities account for 29 percent of the Barclays U.S. Aggregate Bond Index, a common benchmark for mutual funds, meaning the debt’s performance can be influential in determining the returns seen by investors, according to data from the bank.
      American Capital and Armour Residential REIT Inc., which target Fannie Mae, Freddie Mac and Ginnie Mae securities have been some of the worst performers. Both slumped more than 30 percent since Denahan’s remarks. American Capital President Gary Kain and James Mountain, Armour’s Chief Financial Officer declined to comment on the companies’ losses.
      “The space has not been getting love,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. “It seems like one way or the other they’ve had fears weigh on valuations. Last fall it was that rates were so low that new investment spreads were not as attractive and investors were worried about earnings and dividends. Now rates have moved up and instead they are worrying about book value.”
      Book Values
      Investors have been overcompensating in selling REIT stocks while preparing for bond prices to fall further, according to Steven Delaney, an analyst in Atlanta at JMP Securities LLC. That’s increased the discounts to net values of REIT holdings, or book values, at which the shares trade.
      On July 5, companies that invest in only government-backed bonds were trading at 88 percent of current book values on average, he said. Whether to buy the shares depends mainly on the direction of mortgage-bond prices, which may be set for new sharp moves as Fed Chairman Ben S. Bernanke speaks today in Boston, he said.
      “It’s kind of a coin flip,” he said. “I’m hoping Bernanke is going to try to calm the market a little bit, but I don’t want to invest on that hope.”
      Analysts are split over whether the worst is over for the mortgage REITs.
      Daniel Altscher, an analyst at FBR Capital Markets & Co. said the group “got undeservedly whacked and from a trading perspective looks attractive in the short term.”
      Merrill Ross, an analyst with Baltimore-based Wunderlich Securities Inc. said this week she didn’t see relative value in REIT stocks for the first time in five years.
      “There is heightened risk that the only way to raise liquidity might be to disgorge bonds at firesale prices,” Ross said in a report this week. “Investors need to be mindful of the potential downside scenarios.”

      • 1 Reply to heres_yer_fiber
      • Keep Checking’
        “I keep checking,” said Boston, whose REIT owns more commercial-mortgage bonds than some peers.
        Still, REITs’ sales of mortgage bonds to meet margin calls and maintain leverage have “absolutely been a factor” in the slump in mortgage-bond prices, Hackel said.
        Credit Suisse Group AG analysts led by Mahesh Swaminathan wrote in a July 8 note to clients that higher interest rates could trigger further REIT sales, creating a “key risk” to their recommended bet that mortgage bonds would outperform.
        REITs and other investors that use leverage helped push up bond yields as they sold debt or added bearish bets on Treasuries as hedges, Scott Minerd, chief investment officer of Guggenheim Partners LLC, said in a July 9 note to clients.
        “Rising rates will continue to reduce housing affordability, which is especially troublesome because housing is the primary locomotive of U.S. economic growth,” he said.
        Mutual Funds
        U.S. government-backed mortgage securities account for 29 percent of the Barclays U.S. Aggregate Bond Index, a common benchmark for mutual funds, meaning the debt’s performance can be influential in determining the returns seen by investors, according to data from the bank.
        American Capital and Armour Residential REIT Inc., which target Fannie Mae, Freddie Mac and Ginnie Mae securities have been some of the worst performers. Both slumped more than 30 percent since Denahan’s remarks. American Capital President Gary Kain and James Mountain, Armour’s Chief Financial Officer declined to comment on the companies’ losses.
        “The space has not been getting love,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. “It seems like one way or the other they’ve had fears weigh on valuations. Last fall it was that rates were so low that new investment spreads were not as attractive and investors were worried about earnings and dividends. Now rates have moved up and instead they are worrying about book value.”
        Book Values
        Investors have been overcompensating in selling REIT stocks while preparing for bond prices to fall further, according to Steven Delaney, an analyst in Atlanta at JMP Securities LLC. That’s increased the discounts to net values of REIT holdings, or book values, at which the shares trade.
        On July 5, companies that invest in only government-backed bonds were trading at 88 percent of current book values on average, he said. Whether to buy the shares depends mainly on the direction of mortgage-bond prices, which may be set for new sharp moves as Fed Chairman Ben S. Bernanke speaks today in Boston, he said.
        “It’s kind of a coin flip,” he said. “I’m hoping Bernanke is going to try to calm the market a little bit, but I don’t want to invest on that hope.”
        Analysts are split over whether the worst is over for the mortgage REITs.
        Daniel Altscher, an analyst at FBR Capital Markets & Co. said the group “got undeservedly whacked and from a trading perspective looks attractive in the short term.”
        Merrill Ross, an analyst with Baltimore-based Wunderlich Securities Inc. said this week she didn’t see relative value in REIT stocks for the first time in five years.
        “There is heightened risk that the only way to raise liquidity might be to disgorge bonds at firesale prices,” Ross said in a report this week. “Investors need to be mindful of the potential downside scenarios.”

    • I disagree with the some sell, but at least you put out a reason for it.
      I think they are oversold, and will stabilize and start going up do to the actions of AGNC.
      .

    • They say over reaction but it is what it is. Basically the market is more forward looking than they had anticipated with the implication that their margin ratio was too high to survive higher interest rates without severe pain. The market is never wrong. The people who are wrong are the ones who assumed it would have behaved differently and you know who they are because they use words like over reaction. It is like saying that they were wrong but should not have been wrong but there is no such thing because wrong is wrong. My guess is that in the next up cycle that leverage ratios will be lower because they will understand then just how forward looking the market is and then they will then be right.

      • 1 Reply to raybans2
      • They say over reaction but it is what it is. Basically the market is more forward looking than they had anticipated with the implication that their margin ratio was too high to survive higher interest rates without severe pain. The market is never wrong. The people who are wrong are the ones who assumed it would have behaved differently and you know who they are because they use words like over reaction. It is like saying that they were wrong but should not have been wrong but there is no such thing because wrong is wrong. My guess is that in the next up cycle that leverage ratios will be lower because they will understand then just how forward looking the market is and then they will then be right.

        Sentiment: Strong Sell

    • Some have been selling to re-arrange their holdings.
      I wonder if that is what he is seeing.

      AGNC's mid June presentation showed they were not even close to a margin call then.
      They could go out and further leverage up without raising capital.
      And things haven't gotten that much worse.

      REPO haircuts are what. 3.5% or 4% of borrowed capital. Basically it's nothing.
      I would imagine it's possible that repo margin calls happened and some more capital was needed to cover the adjustments on the mbs prices.
      But again this wouldn't be that much capital.

      • 1 Reply to xxavatarxx
      • You imagine...and not that much. what are you joking.
        if you read the entire art. Then you would know.....not that much times 8-10 is huge. And they had a 7 billion margin call already. After that present. and if you had payed att. To art. you'd know. the borrowing terms and rates have signigicantly changed in past 2 months. And largest spike in mort. Rates in 26 years in june. And on and on. Point is. Agnc is losing money. And it's huge. 500 mil last q. 113 mil. Q. Before that. And sp. Decline for 2 years. agnc is getting sqweezed and margins have fallen through the floor. as has book value. so your rosy...it ain't so bad is a bad joke.

        Sentiment: Strong Sell

 
AGNC
23.39+0.15(+0.65%)Jul 22 4:00 PMEDT

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