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rftx713


Total Posts: 118
Joined: May 2016
 
Posted: 2020-03-25 19:29
I am a tourist in the mortgage space, though I couldn't help but notice that Mortgage REITs are getting crushed while MBS seem to be doing alright. (See below for the tickers/MBS proxies I used since I don't have great access to data...)

Mortgage REIT examples: MITT, NYMT, TRTX, MFA
MBS proxy examples: SPMB, MBB, VMBS

I can take a few guesses as to why this is... The first thing that comes to mind is that the Mortgage REITs are very leveraged, so what appear to be small moves can cause blowups. However, I have no idea if this is a cause of the Mortgage REIT pain or a consequence of it (REITs liquidating and causing vol in the MBS market.)

What am I missing?

alpha


Total Posts: 24
Joined: Feb 2006
 
Posted: 2020-03-25 22:39
The ETF tickers you mention are primarily or exclusively agency MBS, which is being actively purchased by the Fed. The mREIT tickers are primarily non-agency MBS exposure.

Markit maintains iBoxx non-agency MBS indices, but they are hard to access.

agentq


Total Posts: 33
Joined: Jul 2008
 
Posted: 2020-03-26 05:03
Look at more pure play mREITs like AGNC, NLY - though they have diversified a decent in recent years as well. And a total return comparison vs. cash MBS isn't quite correct either, as they are more like levered mortgage basis trades. Plot price over Lehman MBS OAS (LUMSOAS Index) or do a simple hedge vs some treasury rate and you'll see the line up a bit more clearly haha

Looks like you chose your REIT examples by worst performers MTD/YTD I guess... which would be dominated by names that dabble in lower credit
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