But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
Why you should think about the direction of interest rates
Mortgage REIT investors have finally gotten a taste of what interest rate risk looks like over the past year. For most of the past 30 years, bonds have been a one-way bet.
This also means a REIT will experience a volatile dividend. Most corporations loathe cutting their dividend because of the message it sends to Wall Street, so volatile dividends are generally rare. For REITs, they’re a fact of life.
The company’s leverage ratio increased from 6.35x to 6.63x. By increasing its leverage, CYS magnifies the returns—both up and down—on the portfolio.
Book value per share is a critical metric for mortgage REITs Since REITs are financials, they tend to trade off of two important metrics: Dividend yield Book value per share…
CYS Investments (CYS) is a diversified agency mortgage REIT that invests all across the agency mortgage-backed security (or MBS) space.
Ginnie Mae and the to-be-announced market The Fannie Mae to-be-announced (or TBA) market represents the usual conforming loan—the plain Fannie Mae 30-year mortgage. Meanwhile, Ginnie Mae TBAs are where government…
Fannie Mae and the to-be-announced market When the Federal Reserve talks about buying mortgage-backed securities (or MBS), it’s referring to the to-be-announced (or TBA) market. The TBA market allows loan…
The ten-year bond influences everything from mortgage rates to corporate debt. It’s now the benchmark for long-term U.S. interest rates.
The Refinance Index rose 10% (from 1,348 to 1,502) as rates finally fell enough to allow refinances. Since mid 2013, refinances had been dropping like a stone.
The MBA Applications Index rose 5.6% after rising 3.8% the week before. This is the second up week after hitting the lowest reading for the MBA Mortgage Applications Index since early 2001.
Mortgage banking has become a lot more competitive as rates increased. The refinance business has fallen off a cliff, and bankers are cutting employees and rates.
Homebuilders use the survey data to measure consumers’ attitude towards future home price appreciation. Mortgage REITs use the survey data to help forecast prepayment speeds and also to gauge consumer sentiment.
In spite of a furious rally in the bond market, which took rates from 2.43% to 2.28%, Ginnie Mae TBAs were more or less unchanged at 106 21/32.
Fannie Mae MBS rallied slightly on a very strong bond market. The Fannie Mae 4% TBA started the week at 106 and picked up about 7 ticks to close at 106 7/32.
The ten-year bond influences everything from mortgage rates to corporate debt. It’s now the benchmark for long-term U.S. interest rates. Note that old-timers might remember when the 30-year bond was the benchmark.
REITs like Annaly, American Capital Agency, MFA Financial, Hatteras, and Capstead could become vulnerable if the Fed dumps its portfolio of MBS onto the market.
The Fed mentioned in the September FOMC (Federal Open Market Committee) minutes that rates need to return to more normal historical levels at some point.
Given the slack in the labor market and the high unemployment rate, it’s almost impossible for wages to rise meaningfully nationally.
Despite falling unemployment, one of the conundrums of the current labor market has been flat real (in other words, inflation-adjusted) wages.
The unemployment rate is the most important data point out there right now, and it has been falling. So why doesn’t the economy feel better to the average citizen?