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BUZZ-BofA says agency mortgage REITs better positioned, upgrades AGNC, Capstead to "buy"

Tue 28th April, 2020 6:01pm
** BofA Global Research says mortgage REITs primarily
focused on agency MBS, such as Annaly Capital Management
 NLY.N , are better positioned to deliver favorable risk adj
returns; upgrades AGNC Investment Corp  AGNC.O  and Capstead
Mortgage  CMO.N  to "buy" from "neutral"
    ** BofA analyst Derek Hewett expects significant agency MBS
purchases by the Fed to provide both liquidity support and
"reasonable" floor for valuations
    ** But he remains neutral on mREITs with large non-agency
portfolios, such as Western Asset Mortgage  WMC.N  and New York
Mortgage Trust  NYMT.O , citing ongoing liquidity and funding
concerns combined with mortgage credit risk as near-term
headwinds
    ** Hewitt downgrades PennyMac Mortgage  PMT.N  to "neutral"
on "meaningfully" lower earnings/sh and dividends/sh
expectations as co curtails higher margin CRT (credit risk
transfer) investments due to new U.S. gov mandates
    ** Mortgage REIT sector roiled last month by extreme
volatility and flood of margin calls from repo lenders, forcing
them to sell assets and/or slash their dividends as the COVID-19
pandemic spurred market dislocations
    
    BofA rating and price changes:
 
     

 (Reporting by Lance Tupper)
 ((lance.tupper.tr.com@reuters.net
lance.tupper@tr.com 646-223-5017))
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