Large mortgage REIT AGNC Investment (AGNC) has announced a new issue of fixed rate reset preferred stock.
AGNC has numerous issues of preferred stock outstanding which can be seen here.
This will be the company’s first ‘fixed rate reset’ issue–no doubt in response to the elimination of LIBOR effective 6/30/2023 and it will be interesting to see what kind of ‘spread’ the company will have to pay.
A fixed rate reset issue is fixed rate for about 5 years after which it is reset at the 5 year treasury plus a ‘spread’. There after the rate is reset every 5 years.
The preliminary prospectus can be read here.
EarlyBird was right on top of this one.
7 thoughts on “mREIT AGNC to Sell New Fixed Rate Reset Preferred”
Wonder why this is trading as low as $23.60. At this price the 7.75% coupon yields 8.21%.
Bought some at Fidelity (no commissions, unlike Schwab / TOS)
mS I was doing some math and looking at AGCGV compared to AGNCM
people have driven up the cost of AGNCM to yield of 7.8
Not taking in other factors like first call or when and at what it floats at.
The AGNCM would have to be at around 21.30 to be 8.21%
So either AGCGV goes up in value or the AGNCM has to fall back down.
Be interesting to see what the next 30 days bring
Here is the term sheet:
Reset spread is 4.39%. If this trades at $25 all other AGNC preferreds seem somewhat underpriced by comparison. Unless there are problems with changing the Libor offsets.
I really don’t think most people price in a reset rate 5 years away. Absent the difference in the floating/reset rates, only AGNCM would yield more than this issue if it trades at par.
So IMO if this trades at par, it is a bargain compared to most other AGNC preferreds unless you believe AGNC will call the others when they start floating and thus they would be better buys due to capital gain potential.
Not sure there is an easy answer here
I always factor in future floating rates, not at full current weight but definitely a factor. If many people don’t then that results in a mispricing, to our advantage. The others will float long before 5 years and at a higher net dividend unless rates plummet before then. The new issue floats on Treasuries rather Libor which is an advantage but can’t argue with the lower prices.
Though I may buy the new one for a flip just because it often works.
Temp symbol will be AGCGV