Agency mortgage REITs were some of the best performing investments during the first half of 2012. Their strength then was largely based on the corresponding strength of the dollar and U.S. Treasuries. More recently, though, the asset class has fallen on hard times due to mounting concerns, including decreasing spreads, rising prepayments and probable dividend cuts, not to mention the rapidly approaching fiscal cliff. These increased risks and the uncertainty that now clouds the market have caused most agency mREITs to decline substantially over the last few weeks. Although these declines may continue, these agency mREITs appear considerably more attractive investments than they have been for several quarters.
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