We published our extensive bear thesis on the mortgage REIT industry Monday–‘The Mortgage REIT Business Doesn’t Work…‘–, and when the markets opened for trading Tuesday, the entire mREIT group came under intense selling pressure, with American Capital Agency (AGNC) leading the charge lower.
Key moves: American Capital Agency (-4.73%), Annaly (NLY -3.47%), Two Harbors (TWO -2.87%), Anworth (ANH -2.08%), Western Asset (WMC -3.75%), Apollo Residential (AMTG -5.43%), Invesco (IVR -4.22%), MFA Financial (MFA -2.2%).
The 10-year Treasury added another 14 basis points today (2.15%), while the 30-year Treasury added 13 basis points (3.31%)–source. The primary driver behind our negative thesis on the mortgage REITs rests on the continuation of higher interest rates, and the eroding of the group’s net asset value via net unrealized losses (negative OCI) on the balance sheet.