Two senior Federal Reserve officials on Tuesday played down the chances that the U.S. central bank would signal a readiness to reduce its bond buying at its meeting next month, dampening speculation the Fed's ultra-easy monetary policy might end soon.
New York Federal Reserve Bank President William Dudley and St. Louis Fed chief James Bullard, both of whom will vote at the June 18-19 meeting, made clear further economic progress was needed before they would support curtailing bond purchases.
"Inflation is pretty low in the U.S.," Bullard told reporters after delivering a lecture in Frankfurt. "I can't envision a good case to be made for tapering unless the inflation situation turns around and we are more confident than we are today that inflation is going to move back toward target," he said.
A core inflation gauge closely monitored by the Fed slowed to just 1.1 percent per annum in March, barely half the central bank's long-term 2.0 percent annual inflation goal. In addition, the U.S. jobless rate stood at a lofty 7.5 percent in April.
In addition to boosting stocks, the U.S. dollar softened and prices for U.S. government debt moved higher on Bullard's remarks, and were given a further lift by Dudley, a close ally of Fed Chairman Ben Bernanke who said the central bank's asset purchases could go up as well as down...........................
(read the rest on Reuters)
Realized gains on Agency Securities sales totaled $18.5 million or $0.05 per Common share.
Total available for distribution supports 0.07 for the next quarter
The WSJ piece was written by Jon Hilsenrath. He is known as the Fed's media mouthpiece and known to be close with the Fed. He has telegraphed almost every move the Fed has made over the last several years. Difference this time is that AGNC has changed their leveraging strategy. They did it for the right reason - to juice the returns in the face of a shrinking spread. It helped them in Q4 2012, bit them in Q1 2013. Not sure they can effectively hedge against monthly fluctuating MBS prices in the dollar roll market. The upshot of it all is more volatility for both AGNC and MTGE (they invested quite a bit of their recent SPO proceeds in agency MBS using the same strategy). Kain's two presentations next week will hopefully shed some more light on the current situation at both these REITs.
Read the article in WSJ for those who have access. Fed is being non committal about timing or any other specifics which probably means more volatility ahead. Not a good time for TBA arrangements, IMHO
Hey Ray, I am sure you are glad you bought back in. David Hamomoto has done a fantastic job of navigating the company through the market meltdown and has applied the lessons learned to significantly alter the company's risk profile. In a few years, NRF will be a stable cash generating machine. Need to be patient and keep cashing in the increasing dividends as the revamped business model unfolds
I remember that time too. I was initially upset when they made that announcement but decided to give it a few quarters to see how it would play out. Happy I didn't bail.
Wish I had bought more when the CFO was loading up. Oh well. Hindsight is 20/20
I suspect no Fed action is off the table. Can't fight the Fed. Next week, expect more noise / jawboning about the systemic risks mREITs pose. This just as Goldman and other wall street banks are gearing up to offer more risky real estate investments to yield hungry investors. Quite fascinating.
Since the big melt down in 2009, I believe NRF is the best performing REIT. Insiders are invested in the common and the company is aggressively investing in growing the business. Dividend is on track to double in ~ 1 year. This ticker will not appeal to the folks who play AGNC options etc. but it is a solid buy and hold nonetheless. Good luck to you
They join leveraged loans and money-market mutual funds as areas of risk cited by officials. Three Federal Reserve officials have singled out mortgage REITs in recent weeks, saying the industry merits watching.
Calvin Schnure, vice president of research and industry information at the National Association of Real Estate Investment Trusts, said that rather than a source of instability, mortgage REITs have been essential to the housing recovery.
."Mortgage REITs have tripled their holdings of agency mortgages over the past couple of years because their access to public markets positions them to put new capital into the housing market," said Mr. Schnure.
The heightened scrutiny stems from the growth of such companies as Annaly Capital Management Inc. NLY +1.42%and American Capital Agency Corp., AGNC +0.06%whose assets have ballooned to more than $100 billion apiece over the past three years. The market capitalization of the industry has grown over the past three years from $22.1 billion to $59 billion, according to KBW Research.
"Mortgage REITs are bigger today, but they are bigger by virtue of an increased capital base," said Wellington J. Denahan, chairman and CEO of Annaly Capital. "Many of us have operated through challenging markets, including the financial crisis, and we continue to support and are helping to implement the regulatory changes that are being put in place to make the markets safer for all participants. This low-rate environment poses risks that investors in every market must be prudent about managing. In general, the mortgage REIT sector does so through a range of hedging tools, like interest-rate swaps, reducing leverage and conservative balance-sheet management activities."
The recipe behind their rapid growth is raising red flags in Washington, where regulators worry about the REITs' exposure to interest-rate spikes, reliance on leverage and short-term funding agreements that can dry up in times of crisis.
A panel of top financial regulators is targeting mortgage real-estate investment trusts as a potential risk to the U.S. financial system, the latest example of Washington's growing concern with market bubbles.
Next week, the Financial Stability Oversight Council, a panel comprising the top U.S. financial regulators, is expected to cite mortgage REITs as a source of market vulnerability in its annual report, according to people familiar with the matter, a distinction that could set the stage for stricter oversight of the industry.
Eager to avoid the mistakes of the past, regulators are attempting to identify overly frothy activity before it poses problems. Even though the economy continues to recover only slowly, regulators see potential bubbles forming in a range of financial markets, in part because of the Federal Reserve's easy-money policies, which have driven interest rates to near-record lows and prompted investors to seek higher returns elsewhere.
Fed official William Dudley says mortgage REITs merit attention.
Mortgage REITs, which are publicly traded financial companies that borrow funds to invest in real-estate debt, have seen their assets quadruple to more than $400 billion since 2009. They differ from traditional REITs in that they invest in mortgage debt, rather than actual real-estate like office buildings or shopping malls. The firms take advantage of inexpensive, short-term borrowing to buy mortgage securities backed by Fannie Mae FNMA +0.38%and Freddie Mac, FMCC -0.26%and offer returns to investors of as much as 15%.
Ray, for my sake, I hope you sold too soon. With increasing dividends pretty much locked in for the next few quarters, the pps should continue heading north.
Any of the old timers on this board know what happened to ag55gen? I miss his insightful commentary
Liza - I bought ETP last year and have two related questions
1. In Turbotax, the various "Y" items reported by ETP do not have a corresponding place for entering the information. Turbotax has only one box for "Y", nothing for Y1, Y2, ...How have you dealt with this problem before? Where does all that information flow
2. When creating separate K-1s for ETP, APU, and SXL, what do you do with the information that is on form 1065. Do you enter all the information in Part II of that form for each of the K-1s you create for ETP, APU, and SXL
SAC continues to be in the news. Another trader arrested yesterday. SAC investors are asking for their money back. SAC recently reported a passive 5% stake in NRF. If the pace of redemptions picks up, NRF could experience short term downward pressure.
liza - today's wsj reports that natural gas supplies are dwindling and prices are rising (approaching 4$). what are the implications for NKA pps and future distributions. thx for your opinion
One possibility is a lot of ARR investors looking for a new home. Stock is now trading at a 15% premium to last reported NAV. Getting frothy.
Stock is trading at a 10% premium to book value. SPO risk. Plus missed consensus earnings forecast. Price may drift a bit lower
Q4 2012 Earnings out. Consensus was $0.25, reported $0.19. Missed by $0.06.Slightly down in AH
Earnings for the year were $1.08, exactly equal to 4X their quarterly dividend. Conf call tomorrow morning. Should be interesting.