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American Capital Agency Corp. Message Board

  • onion1273 onion1273 Jan 3, 2013 2:35 PM Flag

    FOMC minutes state that QE3 will end in 2013!!!

    That means MBS will get cheaper and yields will rise.
    Good for AGNC.

    PS MBS are much cheaper already on the news

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    • I was looking for the item that started the selloff. Here is the Rueters version.
      This is good news for our sector.

      * Fed concerns trigger sell-off

      * Some Fed policymakers suggest early end to stimulus

      By Frank Tang

      NEW YORK, Jan 3 (Reuters) - Gold prices fell more than 1

      percent Thursday on signs that Federal Reserve officials are

      increasingly concerned about the risks of the Fed's asset

      purchases on financial markets, reducing bullion's appeal as a

      hedge against inflation.

      Minutes from the Fed's December policy meeting showed a

      growing reticence about further increases in the central bank's

      balance sheet, which was expanded sharply in response to the

      financial crisis and recession of 2007-2009.

      The minutes also showed several officials thought it would

      be appropriate to slow or stop asset purchases well before the

      end of 2013, citing concerns about financial stability and the

      size of the balance sheet.

      "With the news that some policymakers suggested that the Fed

      could withdraw QE before the end of year, that put a dent on one

      of the underpinnings on gold, which is expansionary monetary

      policy," said Mark Luschini, chief investment strategist of

      Janney Montgomery Scott, a broker-dealer which manages $54

      billion in assets.

      Economic fears due to unprecedented Fed monetary stimulus,

      including printing money to buy assets - known as quantitative

      easing - has been a key driver in boosting gold, a traditional

      inflation hedge.

    • I think the Fed minutes will be forgotten tomorrow. However the debt ceiling is lurking which I believe will lead to spreads coming in. Maybe substantially or maybe not. We shall see.

    • I think the FED may FINALLY be indicating real concern about future inflation caused by all the easing

    • For reasons that I articulated in earlier post - this is all very premature. SOME Fed officials suggest that the Fed MAY want to exit sometime in 2013. How does that impact mreits over the next 9-12 mos? What will these same Fed officials say/think 9-12 mos from now? Bernanke and Yellin both want to keep buying. If rates creep up even a little - refis grind to a halt - meaning there is very little new issuance - meaning that the Fed's share of the mkt buying new issuance gets even bigger % wise. Also the Fed is both committing new $$ and reinvesting $$ from their existing portolio. This 2nd part of their purchases keeps getting bigger as they acquire more and more mbs. The Fed Fed could stop committing new $$ and just reinvest their monthly principal & interest and still control the mkt.

      Also - as rates rise - the BV of AGNC's existing prepayment protected portfolio goes DOWN - offset to some extent by increases in the value of agnc'd hedges . but offset by the increased cost of new hedges.

      In short - predicting a Fed exit is premature and when/if it happens - the consequences of any such exit will be difficult to manage/ predict.

      • 1 Reply to stockmeister3
      • All very true, but I trade AGNC not FOMC, and selling my Roy today at $5.6 for a 1.3x bagger over a one week holding period made me smile. It was nice to start the first closed trade of the year with a realized gain. A nice confidence booster, and I'll be back later.

        On a news basis, with Geithner leaving gives the GOPuxxies another leverage point on Mr. Stalin, (oops I meant Mr. Obama) in the debt ceiling negotiations. They can threaten not to confirm his next Treasury Secretary appointee to gain concessions. I am really looking forward to a volatile Spring 2013, AGNC price volatility spells massive trading gains for me.

19.5043+0.0243(+0.12%)11:51 AMEDT