Implications for the mortgage REITs. A flattening yield curve is a double edged sword for mortgage REITs like AGNC, NLY, or HTS. On one hand, as yields fall, it means that the price of their assets is increasing, which gives them mark-to-market gains.
The yield curve remains very flat, but it has been that way since the end of Q2 2018. Book value is under pressure for residential mortgage REITs because of a spread widening between agency RMBS.
A flattening yield curve is often a feature of a rising rate environment. A flattening curve can spur worries about an economic slowdown. Yields and debt prices move in opposite directions.
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A flattening yield curve is a major threat to residential mortgage REITs. The Federal Reserve has been hiking rates and driving the yield curve to a much flatter level. We’ll highlight one that.
A flattening yield curve is normal at this stage. Wagner says it’s not unusual for the yield curve to flatten late in an economic cycle , which is where he believes we are, especially as stock.
Why is the yield curve flattening today? Recently, we’ve seen the yield curve flatten. This summer, the difference between the yield on a short-term 2 year treasury note and a long-term 10 Year Treasury note has been as low as 25 basis points. This is the lowest we have seen since early 2007. It’s not yet inverted, but it’s getting closer.
The yield curve is a graph that shows, at any given time, how the yield varies with the period for which the yield holds. A flat yield curve means that yields on long-term bonds are not much higher than those on short-term notes. Bond markets affect mortgage markets, and vice versa, because a large part of all new mortgages are converted into.