IVR - Invesco Mortgage Capital: 'Taper Tantrum' May Prove Deadly For Mortgage Lenders

• Record stress in the repurchase agreement market, as well as accelerating inflation, are tell-tale signs that the Federal Reserve must soon pursue tapering.
• The U.S mortgage market is now almost entirely dependent on quantitively easing, so an end to Q.E will likely cause a rapid increase in mortgage rates.
• Mortgage REITs like Invesco Mortgage Capital may see another round of rapid margin calls in this situation due to extreme leverage levels.
• In reality, the economy today "lacks cash on the sidelines" as asset prices and leverage create the significant possibility of a major liquidity crisis.
• Investors can easily shelter themselves from such a crisis by maintaining high cash reserves and considering short-selling at-risk firms like IVR.

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