Works fine if the market is just bouncing up and down based on minor changes in expectations. That is not what 's happening now. The bond market, which is much larger than the stock market, is undergoing a major turnaround that is going to savage the book value of all mREITs. Since mREITs trade close to book, the stock prices take a beating also. AGNC will eventually recover, but before doing so it may reach a low point that now looks unbelievable.
The interest rate on the 5 year treasury has increased by exactly 60% in the last month, and the rate on the 10 year has increased 25%. And there appears to be nothing on the horizon that will halt the drop in bond prices.
The mortgage markets are now dominated by an non-economic player, resulting in conditions in which all classical economic and financial norms and incentives do not apply. Making matters worse, since the Fed has no experience trading, they are unaware, and even deny, that they are disrupting the market. That's why I decided to withdraw to the sidelines and wait it out.
Though book values have taken a severe beating the spreads are still good as long as short term interest stays low. I think it will be acceptable to hold at a premium to book value as long as the share price generates close to a 20% return. I do not see the short time interest rate go up significantly anytime soon.