Mortgage REITs Hit By Rate Rise Fears
Sector Fails To Rally With Wider Market
Financial Times - 7/30/2013
 |
"The Theory of Swaps" Real World View |
"Deteriorating prices for U.S. agency mortgage-backed securities (MBS) are driving steep declines in real estate investment trusts (REITs). Shares in the two largest U.S. mortgage REITs, which each hold tens of billions of dollars in agency MBS, have fallen by 25% and 35% respectively from the start of May."
"Rising interest rates reduce the likelihood that homeowners will refinance their mortgages, forcing the prices of agency MBS lower to reflect the risk of holding the bonds for a long time."
"Efforts to hedge against sharp moves in interest rates have broadly failed so far, analysts said."
"Companies in the sector, which hedge holdings with 10-year treasury swaps, have blamed the widening spread between agency MBS and treasuries for the additional losses."
Michael Widner, analyst with KBW, said: "In theory, these companies should not be as affected by the rising rates as they have been."
Of course, NCUA has its own theory about interest rate swaps...
 |
| "The Theory of Swaps" NCUA World View |
1 comment:
In Theory about says it all! It is just to bad the NCUSIF is in the real world!
Maybe you should consider paying bay the fund with theoretical dollars for the real world losses when the happen.
Post a Comment