American Capital Agency Corp. (AGNC), Annaly Capital Management, Inc. (NLY): Fed’s Taper vs. mREITs, Who Wins and Why

While the best days are over for mortgage REITs (the sector performs best when interest rates are headed downward, and book values increase in line with declining rates), mortgage REITs continue to offer compelling yields in a yield-starved market. Investors should stay the course.

When the MBS market levels out, mREITs can capitalize on higher long-term rates while borrowing at currently low short-term rates. The biggest fear is that the Fed raises short-term rates faster than expected, but with unemployment well above Bernanke’s 6.5% threshold for potential increases in the overnight lending rate, short-term interest rates should stay low for quite some time.

The article Fed’s Taper vs. mREITs: Who Wins and Why originally appeared on Fool.com.

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