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Annaly Capital Management, Inc. Message Board

  • davesmith49 Mar 14, 2012 9:09 AM Flag

    Question about rates

    After yesterday's action, it looks like long term rates are rising. I know Annaly tries to maintain a neutral bias and has a barbel approach. But I don't follow it closely. Do you long-timers see Annaly's earnings being higher or lower in say, the next two quarters, if bonds sell off?

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    • Spreads are widening = ++
      NLY has low leverage at a time when spreads are better = ++

      Not knowing whether or not NLY will leverage at this point = uncertain FFO
      Uncertainty = --

      In summary, they are in a perfect position right now. If they decide to unleash the leverage they will have a better portfolio than any other mREIT that has leveraged higher prior to the new spreads. Thus if they leverage then they will outperform all estimates however, it looks like they have a reason for the de-leveraging. Its possible that they may pass on the current spread if they plan to hold course. In the meantime, you will get between 12% & 14%.

      Ill take my chances with these guys. In for 150k shares.

    • Refinances will be reduced. This reduces the premium amortization impact on the MBS interest rate. Net positive.

      Book Value would decrease. Not much of an impact when NLY has such a low leverage rate.

      IMO....Long rates going up and short rates staying the same.....Great news for NLY.

      • 3 Replies to gcmorgan_98
      • If NLY does not increase their leverage or SPO how can they take advantage of better spreads? 3 billion of cash disappeared from last quarter's balance sheet. Refi may hit distributable income and we may see a hard hit in the divy. I hope management can show us something different. JMO

      • davesmith49 Mar 14, 2012 7:07 PM Flag

        I held the stock for someone else 7-12 years ago, and followed it closely back then. Back then they were really struggling with a narrow spread, even an inverted yield curve, but they always managed to post a great dividend somehow. This company is extremely well managed. Solid fixed income was a great thing in recessions. They never disappointed. Seems to me like we're entering a Goldilocks setup for NLY. The spread should widen nicely. And it's coming back to me about the refinancing risk, like you said. I remember them talking about refinancing hurting them as rates fell. I'm sure that will lessen now.

        I'm sure NLY is a buy right now, the question is, who will buy? I'm up to my neck in BAC. I think NLY is just playing second fiddle for the time being. Some people probably sold out and got in banks before the results of the stress test. I know I did with some other perfectly good stocks. But those of you holding for divs should be in great shape, much better shape than when I held it for years. Thanks for the reply and good luck!


        Trying to determine why mREIT has gone down today, not just NLY - see the above link if that could be the reason.

        Next 3 to 6 months NLY will be trading flat with 17 the ceiling. The floor - 15.75 and above.

        Just my 2 cents.

        NLY might be the biggest in $$$ size, and not as nimble as the smaller caps.

        One always wants to buy at the lowest price as much as possible.

    • looks like div will be cut drastically. do not buy.

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