In AGNC 1q13 ER conference call http://seekingalpha.com/article/1400301-american-capital-agency-s-ceo-discusses-q1-2013-results-earnings-call-transcript Gary Kain makes it clear during the Q&A portion of call that he thinks most of the damage has already been done to taxable during Q1:
"...many of the TBAs that create the realized gains and losses actually have already been rolled to the next quarter. So it's not completely variable with respect to what happens in the market. Again, a good chunk of those levels have been
locked in for the quarter, so to speak."
He also points out that such negative impacts to taxable from pairing off TBA's go the other direction during bull flattners, boosting taxable in a manner that I would describe as temporary fluff:
"....in Q1, you had an
environment where just the price of the underlying irrespective of the dollar roll level was declining and you were locking in these lower prices from the
perspective of realized losses. ...In the case where mortgage prices are going up, then you will be in a situation where you will actually end up with more taxable income than you
probably should in that environment to or then what’s actually implied by the drop and so you will have the reverse of that scenario."
In terms of absolute rates, and in terms of payups market prices are now right back around at the levels that we were in 1q12 when the div was reduced from $1.40 to $1.25. And our BV is now right back around at the level that it was in 1q12.
I don't think the dividend is sustainable in AGNC. That said, I do think AGNC will hold the $1.25 dividend for this and next quarter. They sure don't want to toss another log on the fire. When insiders start jumping in with serious buys, then I am going to buy back in. So far this is not happening! Just a bad time to be trying to second guess this sector and pick bottoms.
hi tay - a very, very excellent technical/accounting perspective analysis. however, much like the previous poster stated, with the markets in a risk on momentum, the emotional psyche the average retail investor MAY overcome their logical reasoning. at least until the market takes a downturn (IF it actually does) .
just my 2 cents
GL2A AGNC longs
Thanks Walrus8, I certainly hope you're right, although I provide free in depth analysis I am actua;lly happiest when it sells off. The cheaper the better for my dividenders. I bought more MTGE at the ask today, but my $24.51 AGNC limit buy order went unfilled.