Investing.com —\u00a0The Federal Reserve’s recent decision to cut interest rates by 50 basis points may have sparked the next bullish cycle for mortgage REITs (mREITs), according to a new report from B. Riley.<\/p>\n
The firm notes that historically, rate-cutting cycles from the Fed have coincided with rising performance in mortgage-related stocks, as mREITs, which are highly sensitive to interest rate changes, benefit from reduced funding costs and improved earnings potential.<\/p>\n
B. Riley emphasizes that mREITs rely heavily on short-term debt financing, which typically matures in 30 to 90 days.<\/p>\n
As interest rates decline, B. Riley explains that mREITs can refinance at lower rates, which “enhances carry-on long-duration MBS holdings” and boosts earnings power.<\/p>\n
The note also highlights how lower rates allow management to operate with higher leverage and widen duration gaps, further improving profitability.<\/p>\n
“We believe most mortgage stock valuations today do not capture the expected improvement in fundamentals,” B. Riley states, pointing out that residential mREITs currently trade near 0.9x book value with a 13% forward dividend yield.<\/p>\n
Agency mREITs, such as ARMOUR Residential REIT (NYSE:ARR<\/span>) and Cherry Hill Mortgage (NYSE:CHMI<\/span>) Investment, are expected to see the greatest benefit from the Fed’s rate cuts due to their reliance on fixed-rate mortgage-backed securities (MBS) and short-term financing.<\/p>\n Hybrid and non-agency mREITs, including Ellington Financial (NYSE:EFC<\/span>) and New York Mortgage <\/span><\/span> (NASDAQ:NYMT<\/span>) Trust, are also expected to gain from improved securitization economics and higher mortgage origination volumes.<\/p>\n Meanwhile, commercial mREITs, such as Franklin BSP Realty Trust, are expected to benefit from improved cap rates and increased transaction volumes, despite modest spread compression.<\/p>\n B. Riley concludes that with the Fed likely to continue cutting rates, mREITs are well-positioned for a sustained bullish cycle.<\/p>\n","protected":false},"excerpt":{"rendered":" [db:\u6458\u8981]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2061","post","type-post","status-publish","format-standard","hentry","category-stock-markets"],"_links":{"self":[{"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/posts\/2061","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/comments?post=2061"}],"version-history":[{"count":0,"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/posts\/2061\/revisions"}],"wp:attachment":[{"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/media?parent=2061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/categories?post=2061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cryptoopia.com\/wp-json\/wp\/v2\/tags?post=2061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}