Compass Point Sees Annaly Capital Management Take View on Short Rates

In a report published Thursday, Compass Point analyst Jason Stewart reiterated a Neutral rating and $12.00 price target on Annaly Capital Management NLY. In the report, Compass Point noted, “Yesterday after market close, NLY reported 2Q14 core EPS of $0.30 compared to the consensus estimate of $0.26. The beat was driven primarily by greater than expected interest rate spread expansion as the company dramatically reduced hedges on the short end of the curve (-$24B in the 0-3 year maturity bucket to $702mm from $24.5B). As a result, the average interest rate spread expanded 36bps QoQ to 1.26% from 0.90% and the cost of funds declined to 1.94% from 2.31%. The hedge portfolio covered 48% of repurchase agreements at 2Q14 versus 94% at 1Q14. Book value per share (BVPS) increased approximately 7.6% QoQ to $13.23 from $12.30.” Annaly Capital Management closed on Wednesday at $11.26.