Today the Fed announced to purchase $300B of longer-term Treasuries, $750B of MBS and $100B of GSEs, bonds soared off of this news. The 30yr treasury bond futures were up over 4 points on the day which was a record +4% one day move.
The Fed's statement said the following regarding these decisions:
"The Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability."
"To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750B of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100B to a total of up to $200B."
"Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300B of longer-term Treasury securities over the next six months."
"The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets."
Today’s announcements are a major positive for funds that invest in mortgage related debt. Below is a list of all the closed end funds that are involved in mortgage related products, I’ve also included the dividend yield and discount or Premium to NAV. For a further analysis of historical NAV history and fund composition you can use this site http://www.etfconnect.com/
Its just a guess but I have to believe that some and probably most of these funds will be higher 12 months out. The high dividend yield and big discounts to net asset value also make these funds appealing.
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