Two Harbors’ sophisticated investment strategy of buying mortgage servicing rights and being short TBAs helped it weather the bond market sell-off.
The 12% year-over-year gain resembles the gains we saw during the bubble years. Both distressed sales and non-distressed sales rose by similar amounts.
The IBD/TIPP Optimism Index increased by 3 points to 41.4 versus 38.4 in October. It’s well below its 12-month average of 45.
Refinancing activity affects prepayment speeds, which are a critical driver of mortgage REIT returns.
The company declared a 50 cent dividend, which was the same as core earnings per share. This corresponds to a 13% dividend yield at current levels.
The Republicans were against a politician taking the job for fear that he would be more interested in furthering political objectives over looking out for taxpayers.
Mortgage delinquencies are falling as home prices rise and the foreclosure pipeline clears. Declining delinquencies mean good things for non-agency REITs.
Now that the government has figured out a way to kick the can down the road for a while, the focus turns back to economic data and earnings.
On Wednesday, the FOMC decided to maintain current policy and made comments about the strength of the economy.
Mortgage-backed securities are the starting point for all mortgage market pricing and the investment of choice for mortgage REITs.
If TBAs drop in price, that means higher mortgage rates, and the Fed won’t want to risk damaging the budding recovery in real estate.
The Fed continued to tell the story that the economy is improving—the job market is getting better, and if things play out as expected, the Fed will reduce QE.
The Fed’s assessment of the economy was that it’s stronger than last year, and it expects the economy to continue to strengthen.
Hatteras suffered a 20% decline in book value per share, as duration risk hit its portfolio and MBS spreads widened—especially in the long-duration sector.
Needless to say, all REITs have suffered over the last quarter, as the Fed has threatened to take away the quantitative easing punchbowl and rates have risen.
We saw a big tick downward in perception of the economy. In spite of a resolution to the government shutdown, conditions are still dropping.
Unemployment is a profound driver of economic growth, and persistent unemployment has been the Achilles’ heel of this recovery.
The consumer’s assessment of the labor market was predictably mixed. Perhaps the government shutdown played a part in that statistic.
The index increased 0.9% month-over-month and 12.8% year-over-year. Prices have risen the most in the areas that were hit the hardest.
With the taper pushed off until 2014, bond funds might be a good intermediate play. Interest rates are still historically low, so investing in bonds is risky long-term.