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Strategies & Market Trends : Dividend investing for retirement

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To: Paul Senior who wrote (6989)	12/30/2010 1:50:52 AM
From: Elroy	Read Replies (1) of 34328

Yup, I think my understanding of what they do is what you said. Loan default is not the risk, a change in interest rates where short term borrowing costs go up faster than the rates of their longer term loan portfolio is the risk. They're a bunch of dudes speculating on interest rates. Not really a traditional REIT in any sense. Any idea why the shares (of AGNC) yield 18% or so? That's way above junk level debt for corporate debt. Although their approach seems OK, it must not be that safe given that level of yield. They use hedging techniques and sales so that they aren't long term holders of a particular loan or loans. What does that mean? By "sales" I think you mean they buy a 2 year loan, and sell it a month (or however long suits their portfolio duration goal) or so later, and perhaps raplace it with another 2 year loan. What hedging do they do?

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