In premarket I swapped client to a long/long position. I will swap back after agnc pops on earnings to a short/long position.
The portfolios are very similar. Mtge's book value has faired better than AGNCs since 2012 when MTGE went public.. In a falling rate environment characterized by a weak housing market - agnc would outperform to some degree. But in a flat to higher rate environment and flat to moderate growth in housing - mtge outperforms. So it is my belief that the spread will narrow again. Mtge also has access to the MSR market while agnc does not. MSRs are expected to boost mtge's earnings as they ramp up. I believe rates are at the low end of their range and will likely move higher over the next 6-9 months ahead of fed tightening.
Get long mtge and get short agnc. The spread is really wide, around $3.65, the widest it has been in 52 weeks. The yield spread is positive 2% as well. I just put a client into this trade on Friday.
Ray, that is because TGs are killed or raped if they tried to stand out there holding signs.
Have you seen the 10 yr bond? it's 2.47%. It keeps falling... it's down like 60 basis points from 7 months ago. What rising rate environment are you talking about? We are in a falling rate environment. Might even drop below 2% by the end of the year. That said, I am short the 10 year treasury at 2.475%, 4 contracts (US 10 yr futures). I also own 21,500 shares of MTGE and have 215 $20 MTGE September calls . I must warn you... That if you are short, you should consider covering until post earnings at the very least. I believe AGNC and MTGE are going to go up 15% or more over the next 3 months. Remember, these things can trade above book value very easily. Especially since the rates are coming down. I am not trying to root against you. I am simply stating the obvious. Heck, you might even make some good money shorting later this year.. but right now.. being short is a losing strategy. Keep a close eye on the 10 year bond.
Lesbians, gays, bisexuals and transgenders should NOT be discriminated against. This was helpful legislation. I think they should be given free therapy if they seek it too. Just in case some of them are LBGT because of an mental disturbance. I am not saying all of them are mentally disturbed.. its just.. I have personally had a number of friends who were LGBT who did finally get into therapy and found out they were not gay etc and now are married straight with kids.
There will be many more up weeks for AGNC over the next 2 months. $25 price coming. Why? Positive earnings report and book value of $26, Dividend run up... 10 year bond is in the 2.40s, (but doubt it will break 2.42. We will see) Most likely range bound though... between 2.42 and 2.66
wahoo99421, Thanks for the differing opinion. I like hearing all different view points. 4.5% happens (imo) because the 10 year bond will move in advance of the fed rate hikes.. it will position well ahead of time. So.. 3-6 months before we actually get hikes... the 10 year bond will price those in. Forward looking... So.. 3.65% to 4.25% seems likely over the next 12 months. I don't see rates moving lower than 2.42% in the near term.. and I expect rates will rise over time with the economy.
Market is saying inverted yield curve.. That's what it is saying.. But that's not gonna happen unless bond market says we are going into a depression and they expect fed to raise rates anyways.
Because falling interest rates MUST be bad for Mreits.... Oh and guess what market says rising rates are bad too. So I guess it's a lose-lose.
Only reason Mreits got #$%$ in 2013 is cuz they all bet heavily that rates would fall due to all that QE. Problem was they started taper talk only a couple months after QE started. QE caused yields to ties not fall.. Then when QE taper started and continued - yields dropped. Opposite reactions to what market players thought would happen.
And rates aren't going to Pluto here.. Even after fed hikes.. Short rates will be targeted at 2% new-neutral according to Yellen. So 4 to 4.5% 10 yr bond yield. Mreits will hedge up more and book values will likely be little changed. 5-10% declines overall? Factor in dividends and total returns will be positive STILL lol.
Bet u don't have the guts to step in front of this treasury bond rally. 2.47 on 10s and I went short here on bonds while staying long mtge. Every tick is $125 gain/loss.
If you are so sure rates are going up why don't you short the 10 year futures contracts? Or short some treasury bonds? Or buy some swaps? You can add hedges to your own merit positions. Like I am long 21,500 mtge shares and short 4 10 yr treasury futures. It will protect you from nav declines but not stock discount/premium #$%$.
In yields lower in one day. 2.47% on 10s and mtge unchanged on day. agnc outperforms again. I really hate this stock lol. Is it too much to ask that the stock price follows the bond market in both directions not just when rates go up?
Also, the MSR platform MTGE has... RCS... Is a big deal. AGNC doesn't have access to buy MSRs in any meaningful way.
Hatedahft, I have been thinking the exact same thing. AGNC always outperforms it seems. Yet AGNC carries with it more interest rate risk. Non-agency bonds are doing really well. It just doesn't make any sense. Someone is manipulating the stock of MTGE cuz it's not as liquid as AGNC.
Eww.. Sidelines is a bummer. And alkkov is not on the sidelines. He is making too much bank to go to the sidelines lol. He writes covered calls against positions and uses other hedging to protect when appropriate. I am not on the sidelines either. I am hedged up because i went short 4 10 year treasury futures with the 10 year yield at 2.51%. I actively trade within the bond market with a close eye on fed policy. All you need to know is that we are in the lower portion of the rate range and it's likely rates will rise over the remainder of the year and into the first quarter of next year as they try to get ahead of the curve (fed rate hikes will threaten the bond market). Strong jobs data suggests we are definitely on track for the fed to start raising rates in Q1 2015 or Q2 2015.