Nomura’s Matthew Howlett yesterday described mortgage REITs as the “epicenter” of the current crisis.
The sector holds about $500B of mortgage-backed
securities – not necessarily a bad thing except for the fact that the
holdings are backed by just a little bit of capital and a lot debt which
needs to be continually rolled over.
The Fed is buying up billions of agency-backed
MBS, but isn’t stepping into the non-agency market, which makes up a
sizable amount of the holdings of a few of the mREIT players.
The hardest hit of the non-agency mREITs is MFA Financial (NYSE:MFA) – it’s up 175% today,
but from penny stock levels. Others today are also showing nice gains,
but again from brutally low levels: New York Mortgage (NYMT +27.5%), Two Harbors (TWO +49%), Invesco (IVR +9.5%), Ellington Financial (EFC +31.8%), AG Mortgage (MITT +29.4%).
Looking at the sector giants, while neither Annaly Capital (NYSE:NLY) nor AGNC Investment (NASDAQ:AGNC) traffic a whole lot in non-agency paper, Annaly does more than AGNC. Both are up about 20% today, but AGNC has outperformed Annaly by about 1,000 basis points over the past month.
https://seekingalpha.com/news/3555114-big-bounces-across-mreit-sector
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