3 Bits of Great News for Mortgage REITs: ARMOUR Residential REIT, Inc. (ARR), American Capital Agency Corp. (AGNC)

Page 1 of 2

After a somewhat lethargic year for mortgage REITs, 2013 seems to be starting out kinder to mREITs of all stripes. As I mentioned previouslyAnnaly Capital Management, Inc. (NYSE:NLY) seems particularly well-positioned to take off, but recent news doesn’t apply just to buyers of Fannie- and Freddie-backed mortgage backed securities like Annaly, ARMOUR Residential REIT, Inc. (NYSE:ARR), and American Capital Agency Corp. (NASDAQ:AGNC).

Without further ado, let’s dive right in and see what recent news items bode well for these companies that make investors money by borrowing short and lending long.

ARMOUR Residential REIT, Inc. (NYSE:ARR)Refinance rates fall, mortgage rates creep up
As fans of the mREIT sector well know, prepayments of loans in these companies’ MBS portfolios is bad news indeed. Seeing nice, higher-rate mortgages paid off and replaced with lower coupon models is surely painful, and compresses spreads even more. This scenario helped Annaly’s spread decline to a paltry 0.95% for the fourth quarter, even more disappointing when compared with American Capital Agency’s more robust 1.63%. Though Armour released some financial data last week, it didn’t reveal the health of its own spread.

It’s always darkest before the dawn, however, and recent mortgage news is definitely looking brighter. The Mortgage Bankers Association released numbers showing that refinance activity has slowed, great news for constant prepayment rates.

Another plus in the MBA report notes that 30-year mortgage rates are up around 3.78%, the highest since last August. Short-term rates staying low while long-term rates climb is just the type of news mREITs and their investors love to hear.

Fed debates slowing of QE3
This news is a real crowd-pleaser. The fact that more people are feeling good enough about the economy to dip their toes into the job pool pleases the Fed, making it feel that its open-ended bond purchasing program is working its magic. While many on the Federal Reserve Board also feel this way, there is a growing chorus of members who think the time has come to consider winding down the monetary easing policy. Minutes from the December meeting show that some advocated termination of QE3 by the middle of this year.

So far, there are no firm answers, and it is expected that the Fed will have quite a debate over this issue next month. However, just the whispers, becoming louder and louder, regarding the end of QE3 is music to the ears of mREIT aficionados.

New MBS offerings
The new reality thrust upon the industry as a result of QE3 has caused new interest in non-agency offerings, as evidenced by a recent announcement that JPMorgan Chase & Co. (NYSE:JPM) is interested in selling private-label securities made up of jumbo mortgages.

These MBSes, made up of mortgages of more than $417,000 and not backed by the government, are considered high quality, and other securities of this type have sold like hotcakes. Jumbos often sport higher interest rates as well — another plus.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!