Mortgage Real Estate Investment Trust (REIT) experienced the biggest drop since 2011 following a better-than-expected job report which fueled speculation that the Federal Reserve will soon wind down its $85 billion-a-month asset-buying program.
According to Investment News, “A Bloomberg index of shares in the REITs tumbled 3.9 percent at the end of trading day on Friday, the biggest drop since October 2011. Annaly Capital Management Inc. (NLY), the largest of the companies, and American Capital Agency Corp. (AGNC), the second biggest, each plunged more than 5 percent.”
REITs that purchase mortgage debt and invest in mortgage backed securities have capitalized on the Federal Reserve asset purchases which has helped keep interest rates low. A rise in interest rates could decrease REIT yields as a result of increase operating expenses.
According to the job report, the US employment rate was unchanged for the Month of June and the US added 195,000, compared to 165,000 predicted by economist. The better the economy, the more likely the Federal reserve will begin decrease its asset purchase program and increase interest rates, which could negatively impact many mortgage RIETs.
The foregoing information, which is publicly available, is being provided by The White Law Group.
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