This research report was produced by The REIT Forum with assistance from Big Dog Investments.
The residential mortgage REIT sector has been fairly volatile during the fourth quarter. Investors were absorbing the third quarter earnings releases and then were grasping with rapid changes in book value.
During December we've seen a much greater impact from "credit spread widening". Earlier in the quarter it was spread widening between agency RMBS and LIBOR swaps.
The mortgage REITs attempt to hedge out a significant portion of the duration risk, but the hedging techniques don't always work. Specifically,