Ginnie Mae TBAs finally outperform Fannie Mae TBAs
Investors are switching out of Ginnie Mae TBAs and into Fannie Mae TBAs. Mortgage REITs are big users of TBAs, quickly increasing or decreasing exposure.
TBAs have been increasingly sensitive to actions taken out of Washington to increase access to credit and mortgage REITs adjusting their portfolios.
Mortgage rates lag the moves in the bond market. Investors realize that absent the developments in Europe, rates should be increasing, not decreasing.
Janet Yellen’s testimony emphasized that growth continues in the US, despite some weakness in the housing sector.
Bonds took Janet Yellen’s Humphrey-Hawkins testimony as somewhat dovish, and rates fell accordingly.
Walmart and TJX announced wage hikes, partly due to state-mandated minimum wage increases, as well as to reduce turnover and retain talent.
The FHFA House Price Index breaks down home price appreciation by region and by state.
While most indices showed the housing market bottoming out around February 2012, the FHFA House Price Index showed it bottoming out around May 2011.
The FHFA House Price Index only looks at houses with mortgages guaranteed by Fannie Mae and Freddie Mac.
Mortgage REITs, especially agency REITs such as Annaly Capital (NLY) and American Capital Agency (AGNC), are exposed to rate volatility.
Book values per share are generally lower than they were when the taper tantrum began, even though rates have moved back close to prior levels.
Mortgage REITs such as Annaly Capital can generate outsized returns over the long haul. Part of this is due to the mortgage-REIT tax structure.
Ginnie Mae TBAs lost 11 ticks, while Fannie Mae TBAs lost only 9 ticks. This is a function of continued low rates and also changes out of the FHFA.
The Fannie Mae 3.5% TBA started the week at 104 19/32 and gave 10 ticks to close at 104 9/32. The ten-year yield increased 6 basis points.
The ten-year bond yield has increased by 41 basis points over the past two weeks, while mortgage rates are up only two basis points.
Overall, we’ve seen the 10-year bond yield pick up 47 basis points over the past three weeks.
Last week, we learned that housing starts for January fell from 1.087 million to 1.065 million. Building permits fell from 1.06 million to 1.05 million.
For REITs, it will be about Humphrey–Hawkins this week. The bond market will probably be vulnerable to begin with, given that we have a deal in Greece.
Since 2008, MFA Financial has paid a quarterly dividend as low as 8 cents and as high as 27 cents a share. It has also made periodic special cash dividends.
MFA reported net income of $0.20 a share, higher than Wall Street’s estimate of $0.187 per share. Book value per share decreased 1.9%, to $8.12 per share.
But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.