Agency REITs see margin stress in mortgage and repo markets

FT: The mortgage Reits entered the coronavirus crisis owning an estimated $500bn of bonds backed by property loans and have come under pressure because they use short-term borrowings to squeeze higher returns from their holdings. “The Reits are at the absolute epicentre of this crisis, given that their business requires leverage,” said Matthew Howlett, Reits analyst at Nomura.

Shares in Annaly Capital and AGNC Investment, the two largest mortgage Reits, have been cut in half in recent weeks. A smaller peer, AG Mortgage, fell 38 per cent on Monday after saying “it does not expect to be in a position to fund the anticipated volume of future margin calls under its financing arrangements in the near term”.

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