MORT - Annaly Capital AGNC Investment cut to Neutral at Piper as rate volatility looms

Piper Sandler analyst Kevin Barker downgrades Annaly Capital Management (NLY -1.8%) and AGNC Investment (AGNC -0.7%) to Neutral from Overweight ahead of expected interest rate volatility. Barker now sees mortgage REITs as fairly valued "given we see increasing rate volatility over the next several months, especially as we approach a potential tripping of the debt ceiling in late October/early November." While he expects both REITs to maintain their current dividends, the increased risk of rate volatility while spreads stay relatively tight implies the risk-reward of owning the agency mREITs is fairly balanced. He'd be more positive if leverage remains low and spreads widen to "present more attractive investment opportunities." He sees PennyMac Financial Services (NYSE:PFSI) and Mr. Cooper Group (NASDAQ:COOP) as the best-positioned mortgage originator/servicers ahead of Q3 earnings. In early trading, most mortgage REITs are in the red — iShares Mortgage Real Estate Capped ETF (BATS:REM) falls 1.1%, VanEck Vectors Mortgage

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Annaly Capital, AGNC Investment cut to Neutral at Piper as rate volatility looms