"My key takeaways are as follows:
•The Fed has now begun tapering in a very slow manner which might last for an extended period and was left open for adjustments along the way... in either direction. This will eventually give the interest rate environment more stability, and while I do believe the 10 year will go to between 3.25%-3.50% in 2014, I think if it goes much higher the Fed will pull back the tapering.
•The Fed clearly announced once again, that the short-term rates will stay exceedingly low (zero interest rate policy) until at least late 2015. That means to me that as long as there is stability in the longer term rates and ZIRP is in place, both Annaly and American can work well between the spread and begin to make greater profits.
•With mortgage rates rising, prepayments and refinances will slow further in my opinion and that will place less stress on the SOP of each of these companies. Another good sign.
•Mortgage applications will continue to increase as the economy heals and that will mean new mortgages at higher rates, with banks also willing to lend since they can now make more profits.
•I feel that the agency backed mREITs will fare better than the non-agency backed REITs, simply because the amount of new business coming and going will be in that arena."