NLY currently trading at $16.50. About an hour ago it traded as low as $14.05. Big volume but I haven't seen anything on the news. Anybody know what happened? Thanks
This is all I found: Agency REITs continue to recover after significant bounce following a sharp sell-off in the first few minutes of trade (Stock Price: 16.73 Change: -0.54) Briefing - Jul 29 at 09:58 Company Symbols: NYSE:NLY Debt ceiling uncertainty, possible U.S. credit downgrade may create significant volatility in the debt markets. Yields are down across the board this session; 10-yr -7.8 bps at 2.872%, near June, late November 2010 lows... CMO -4.3%, NLY -4.0%, HTS -3.7%, AGNC -3.6%, CYS -2.5%, CIM -2.0%, ANH -2.0%, MFA -1.6%.
I'm assuming there were some issues in the short-term funding markets if all the REITs got hit. edit: looks like there was a spike in REPO rates
It could just be bank fear mongering, but that's not what I think. My hunch is this: the mortgage reit business model is borrow short and lend long, meaning they have to roll their short term debt quite frequently. If uncle sam is blocked from the credit market and can no longer roll, who will be there for these reit guys to roll? The credit market exists as we know it because uncle same is always there. Disclosure: I just dumped the last of my meager AGNC holdings this morning after the bounce.. scary stuff going on and not what I signed up for when I bought.
Another factor is that behind the scenes of this debt ceiling drama the collateral value of agency paper and backstops for GSE's is probably in play. This morning's selloff is likely big boys reaction to backroom decision making.
UST GC has traded up to arnd 30bps (that's O/N). Everything else is following, so yes, it's all about the repo mkt.