Keep an eye on the 5 yr swaps, 10 yr Ts, and mortgage rates
A good chunk of the credit assets (senior re-remics) are about 3 yrs in duration so they will ultimately go to par as they get repaid. Some of the credit assets were bought at a substantial discount and payment speeds have been better than expected. They will ultimately move up in price (the recent price dislocation notwithstanding). The swaps rolling off over time by themselves generate $4+ of BV accretion over 5 years.
For the stock to work we just need BV to stabilize and head back up, which should produce some appreciation in the shares along with a large dividend to get you 30%+ annual total return potential.
>> The swaps rolling off over time by themselves generate $4+ of BV accretion over 5 years. <<
Sorry, I don't get that. IVR is paying a fixed rate of interest in exchange for (currently lower) floating rate interest. When the 5-year interest rate swaps roll off, how does that add $4 to BV? Just curious how you prince these as we get closer to the expiration. Do you have a link that shows the M2M over a period of time that I could extrapolate from?