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American Capital Agency Corp. (AGNC), American Capital Mortgage Investment Crp (MTGE) & mREITs, mREITs Everywhere!

American Capital Agency Corp. (NASDAQ:AGNC)May has been a rather drab month for mortgage REITs, and the entire sector has been in a slump since industry heavy American Capital Agency Corp. (NASDAQ:AGNC) and its hybrid cousin American Capital Mortgage Investment Crp (NASDAQ:MTGE) reported lackluster numbers early on. Then came a similarly depressing earnings announcement from Western Asset Mortgage Capital Corp (NYSE:WMC), which reflected some of the same problems faced by the trusts under Gary Kain’s care.

Yesterday, however, the mREITs rallied in a big way, making us wonder: Is this is the dawn of a new day, or just a fluke?

Book values take a nosedive
Like American Capital Agency Corp. (NASDAQ:AGNC) and American Capital Mortgage Investment Crp (NASDAQ:MTGE), Western Asset Mortgage Capital Corp (NYSE:WMC) saw its book value plunge in the first quarter because of a decrease in the value of its portfolio of mortgage-backed securities. Also like its two fellows, the trust sustained per-share losses — which, for Western Asset Mortgage Capital Corp (NYSE:WMC), came to $1.18, while the others reported losses of $1.57 and and $1.66 per share, consecutively, on their stable of agency MBSes.

Reminiscent of Gary Kain’s explanation of his two trusts’ plunge in book value, Western Asset Mortgage Capital Corp (NYSE:WMC)’s CEO Gavin James chalked it up to market jitters regarding the end of QE3, something that he, much like Kain, doesn’t believe will be happening in the near future. Again, Western Asset Mortgage Capital Corp (NYSE:WMC) has seen improvements in book value as the market has calmed, just as Kain reported.

Is the recovery real?
The recent revival of the sector — which was in the red for nearly two weeks — could be based on the unruffling of investors’ feathers as fears of a QE3 exit recede, at least for the moment. Why, suddenly, is this concern ebbing?

Most likely, the jump is the aftereffects of a few bits of dour economic news, which caused Treasury bond prices to shoot up, dropping the yield. Lousy housing data, a dip in consumer prices, and an unexpected uptick in jobless claims all conspired to push prices of Treasuries upward, as the idea of the Fed’s bond-buying spree coming to a close lost steam in the wake of these somewhat grim announcements.