15% Yields Want To Mug Your Dividends

Core Insights - Agency mortgage REITs are currently experiencing high price-to-book ratios, with Orchid Island Capital (ORC) also showing a premium to estimated current book value [1][5] - The REIT Forum provides weekly estimates for these REITs, allowing for more timely insights compared to quarterly updates [2] - The gap between AGNC Investment Corp. (AGNC) and other agency mortgage REITs has narrowed, with AGNC maintaining the highest price-to-book ratio [5][11] Company Performance - Mortgage REITs hold significant amounts of mortgages and hedges, with positions disclosed quarterly, allowing for modeling of projected changes in asset and liability values [3] - AGNC and Annaly Capital Management (NLY) are noted for their size, which limits their nimbleness in portfolio repositioning [8] - NLY's book value has increased moderately, indicating a high valuation compared to historical norms [11] Sector Analysis - The spread between agency MBS and Treasuries remains favorable, contributing to higher net interest income [7] - The premiums to book value for agency mortgage REITs are widening, raising concerns about the risk/reward profile [7] - Other mortgage REITs may benefit from adopting strategies similar to agency mortgage REITs to avoid trading at discounts to book value [7] Investment Strategy - Preferred shares are favored for their yield while waiting for relative value swings in common shares [14] - The current allocation to common shares in the sector is low, with a preference for mortgage REITs that are not at historically high price-to-book ratios [15] - Treasury bill ETFs are receiving increased investment, reflecting a cautious approach in the current market environment [16]