American Capital Agency (NASDAQ:AGNC)

CAPS Rating: 4 out of 5

The company is organized as a real estate investment trust. It uses leverage to invest in single-family residential mortgage pass-through securities and collateralized mortgage obligations that are guaranteed by the U.S. Government.


Player Avatar TMFValueMagnet (92.67) Submitted: 7/18/2013 12:54:51 PM : Outperform Start Price: $22.30 AGNC Score: +4.00

This is a speculative wager; however, I believe the effects of a Fed exit are largely priced into the MBS market. Thus, when the Fed does exit, there will be only minimal changes in MBS prices and mREIT book values.mREITs earn income from the spread in rates, not necessarily whether rates are "high" or "low." When rates rise on the long-end of the yield curve, AGNC should be able to deploy more capital into MBS markets to earn larger and larger spreads. Short-term rates will not be going higher any time soon.

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