UPDATE: Sterne Agee Downgrades Annaly Capital Management to Underperform

Sterne Agee cuts its rating on Annaly Capital Management

to Underperform from Neutral on heightened risk to dividend and book value. Price target is set at $13.50 a share. Sterne Agee notes, "Among comparable companies, Annaly's portfolio has a disproportionately large exposure to RMBS pools at risk for refinancing from the HARP program. Similar pools, such as 2006-8 vintage 30y bonds with 5.0% coupons have displayed prepayment rates in the high 30%s for the month of February, a sizable increase over the company's stated 4Q11 CPR of 23%. In our view this is indicative of acceleration in refinancing activity under this program and is likely to remain elevated in the medium term even given some upward pressure in interest rates (given that these pools' coupons are already much higher)." NLY closed at $16.34 yesterday.