American Capital shares were down 8.7% to $21.80 on Tuesday afternoon. Annaly Capital Management dropped 4.5% to $11.59 and CYS Investments lost 2.5% to $8.50.
After the bell on Monday, American Capital reported a third-quarter loss of $1.80 a share on its investment portfolio worth $77.8 billion. Analysts surveyed by Thomson Reuters had expected earnings of 77 cents a share.
"We continued to see substantial volatility in both interest rates and mortgage spreads," said President and CIO Gary Kain in a statement. "We remained disciplined in our approach to risk management and prioritized book value preservation over short-term earnings."
Kain also said the company's portfolio had migrated into shorter maturity securities, while maintaining high hedge ratios. "We have gradually been increasing our duration gap and begun to transition in the direction of a more normal balance between risk and return," he said.
Also influencing shares, The Financial Times recently reported the New York Fed had instigated a "deep dive" into the relationship between banks and mortgage REITs. The Fed is concerned if interest rates should succumb to volatility, mortgage REITs might diminish their stake in mortgage-backed securities (MBS), sparking a market selloff on a larger scale. FT noted the firms have increased MBS holdings by 188% since 2009 to a combined $460 billion stake.
TheStreet Ratings team rates American Capital Agency Corp as a Hold with a ratings score of C. The team has this to say about its recommendation:
"We rate American Capital Agency Corp (AGNC) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."
- You can view the full analysis from the report here: AGNC Ratings Report