Anworth Mortgage Asset Corporation (NYSE:ANH) – Effects of Fed Tapering


Dallas, Texas 09/11/2013 (Financialstrend) – Anworth Mortgage Asset Corporation (NYSE:ANH) functions as a real estate investment trust (REIT) and it is involved primarily in the business of investing and managing portfolios, including agency mortgage backed securities and non-agency mortgage backed securities in United States, or the United States agency mortgage backed securities. The company is elected as a real estate investment trust for income tax purposes and as a result it is not liable to pay federal corporate income tax on the portion of the income which it distributes to its stockholders.

The company owns a major stake in adjustable rate agency securities, which the Fed (the U.S. Federal Reserve Bank) does intend to buy. Further, the company has sufficient financial backup which elevate to continue its dividend distribution, even if the Fed increases its bond buying program. Therefore, for income oriented investors the recommendation is to long the stock.

It is expected that Fed announcement to come in posts in its 17-18 September Fed meeting. And it is going to be good news for any investors to hold off any new positions.

Previously, on May 22, U.S. Federal Reserve Chairman Ben Bernanke stated that the Fed may taper the bond-buying program rates which is known as quantitative easing (QE), taking in to consideration increasing mortgage rates in the coming months.

QE- Quantitative easing is an important factor which affects stock prices. In it the government, by purchasing financial assets, increases the amount of money. In this case, the Fed has been buying since December 2012 bonds and mortgage backed securities for the amount of $85 billion. This amount of $85 billion every month added to the banking system and as a result borrowing rates will go down as money is in greater supply.

Further, to make investments in the business or to pay more dividends or to buy back shares companies can borrow money more easily and as a result stocks become more valuable.