Dallas, Texas 07/18/2013 (Financialstrend) – Analysts and investors are expecting that the increasing rates of interest will discourage home borrowers from taking out loans. Lower mortgage originations indicates lower mortgage supply backed securities. If the demand stays consistent, this results in price increases. Additionally, the MBS’s existing prices, which are being held by mREITs, will face a fall as these rates continue to increase. The overall effect of these would be increased volatility, which will hurt the agency’s largest mREITs–Annaly Capital Management Inc. (NYSE: NLY)–which is investing exclusively in the fixed rate papers.
The agency mREITs sectors are believed to have been “oversold”. As the 10-year Treasury yield soared more than 2.7%, more carnage in the agency mREITs was observed. As a result, Annaly Capital Management Inc. fell by 2.7%. Presently, Annaly Capital Management is trading close to its 52-week low. The company’s book value from the recent quarter found its stock trading 20% down. The company’s stock is yielding 13.9% even after a dividend cut of 11%. However, these dividend yields come with associated risks, especially in the midst prevailing volatility with mortgage rates.
Annaly Capital Management Incorporated (NYSE:NLY) should be experiencing growth in its top and bottom lines for this quarter. This would guarantee ongoing sustainability with the current dividend rates. The most recent exposure of the company into commercial MBS market through the acquisition of CreXus Investments and the subsequent returns in double-digits available from this market will be helpful in raising the their revenue. Additionally, they, can reduce their expenses by externalization their management structure. Externalization will provide support needed for their bottom lines.