2024-02-14 02:52:25 ET
Summary
- Annaly Capital is a leading mortgage REIT with significant investments in mortgage-backed securities.
- Annaly's fourth quarter earnings showed continual pressure on its net interest spread.
- The Federal Reserve's announcement of lower interest rates in 2024 should benefit Annaly's net interest spread, however.
- Annaly's shares have revalued to about book value, implying a deteriorating risk profile.
Annaly Capital Management ( NLY ) is a well-run mortgage REIT with significant investments in mortgage-backed securities and other assets like residential credit and mortgage servicing rights. Since the Federal Reserve announced in December that it is going to lower interest rates in 2024, I believe mortgage REITs like Annaly generally face positive operating tailwinds in a lower-rate world. However, shares have revalued sharply higher since my last coverage in October 2023 and Annaly now trades at about book value. I believe that the valuation and the risk profile are no longer as attractive as they were in October, which is why I am changing my rating to hold....
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For further details see:
Annaly Capital: Don't Run After This 14% Yield (Rating Downgrade)