Among the asset classes seen as vulnerable to rising rates are high-yielding mortgage real estate investment trusts, or mREITs, including those held by exchange-traded funds such as the iShares Mortgage Real Estate Capped ETF (iShares FTSE NAREIT Mortg.REITIn Fd(ETF) (NYSE: REM)) and the Market Vectors Mortgage REIT Income ETF (Market Vectors ETF Trust (NYSE: MORT)).
During the go-go days of the Federal Reserve's quantitative easing program, MORT and REM were favored destinations by income investors. These days, an average trailing 12-month dividend yield on the ETFs of about 11 percent tempts, but the sensitivity of MORT and REM to rising rates cannot be overlooked.
“Mortgage REITs have exhibited a negative correlation to interest rates changes, especially if the yield curve flattens. Many agencies use leverage to capitalize on the arbitrage spread between short- and long-term interest rates, so companies can still make money in a rising rate environment, as long as long-term rates rise faster than the short-term rate or if the yield curve steepens,” according to ETF ...
/www.benzinga.com/analyst-ratings/analyst-color/16/01/6150067/enticing-yields-and-risks-with-mortgage-reit-etfs alt=Enticing Yields And Risks With Mortgage REIT ETFs>Full story available on Benzinga.com
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