BofA says agency mortgage REITs better positioned, upgrades AGNC, Capstead to "buy"
28/04/2020 18:01
** 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))