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American Capital Agency Corp. Message Board

  • DONEDEALER DONEDEALER Jul 23, 2008 12:49 PM Flag

    Primary risk rising interest rates?

    Note that NLY peaked in March fueled by falling interest rates. Since then it has trended down. Valueline attributes this to fear of future interest rate increases which would squeeze margins. Isn't this a factor for AGNC?

    Admittedly, NLY is trading at a 10%-15% premium to NAV while AGNC is at a discount. Also, NLY is yielding about 15%. Therefore, doesn't this imply, in the present environment, a potential price for AGNC of about 20, not the mid 20's?

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      AGNC is the most undervalued among the three

    • "a potential price for AGNC of about 20, not the mid 20's? "

      $20 in a month. We will see the mid 20's in 6 months. And then even higher.

      And remember AGNC for sure got into its agency rmbs investments cheaper than NLY, how much is debatable b/c of duration issues, but probably about 10 - 20% cheaper.

      On a Risk adjusted basis - AGNC is the best investment in the market right now imo if you consider agency rmbs is risk equivalent of US Treasuries.


    • Yes but only a bit of pressure.

      Why? - b/c with the use of hedges the yield is locked up. A bit of cost to roll over the hedges , but interest rates would have to go way up for many years to crimp earnings much or even dent the outsize 25% dividend currently being paid...once this is discussed in the companies first qtrly cc in August, the cat will be out of the bag and sp will be up at least over IPO price of $20 based on its declared yeild alone.


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