Invesco Mortgage Capital Inc
F:7M20
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Invesco Mortgage Capital Inc
F:7M20
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US |
Invesco Mortgage Capital Inc
Invesco Mortgage Capital is a mortgage real estate investment trust, or mortgage REIT. It does not make homes or lend directly to borrowers. Instead, it buys mortgage-related securities, mainly pools of home loans and other real estate debt, and holds them as an income-producing portfolio. The company is managed for shareholders, so its business is really about owning and financing mortgage assets rather than selling a product to everyday consumers. The company makes money by collecting interest and other cash flow from those mortgage assets and by managing the cost of the borrowing it uses to fund the portfolio. Its main business partners are banks, dealers, and other financing counterparties that provide short-term funding, along with the mortgage security issuers and markets where it buys and sells assets. The key customers, in an indirect sense, are the investors who own its shares and want exposure to mortgage income. What makes the business different is that it sits in the middle of the mortgage market as a capital allocator. It does not originate most loans itself; it focuses on selecting, financing, and trading mortgage securities. That means its results depend heavily on interest rates, mortgage spreads, and credit conditions, which is typical for this corner of the financial sector.
Invesco Mortgage Capital is a mortgage real estate investment trust, or mortgage REIT. It does not make homes or lend directly to borrowers. Instead, it buys mortgage-related securities, mainly pools of home loans and other real estate debt, and holds them as an income-producing portfolio. The company is managed for shareholders, so its business is really about owning and financing mortgage assets rather than selling a product to everyday consumers.
The company makes money by collecting interest and other cash flow from those mortgage assets and by managing the cost of the borrowing it uses to fund the portfolio. Its main business partners are banks, dealers, and other financing counterparties that provide short-term funding, along with the mortgage security issuers and markets where it buys and sells assets. The key customers, in an indirect sense, are the investors who own its shares and want exposure to mortgage income.
What makes the business different is that it sits in the middle of the mortgage market as a capital allocator. It does not originate most loans itself; it focuses on selecting, financing, and trading mortgage securities. That means its results depend heavily on interest rates, mortgage spreads, and credit conditions, which is typical for this corner of the financial sector.
Book value: Invesco Mortgage Capital said book value per share fell modestly in the quarter, but the company still generated a 3.8% economic return, supported by monthly dividends of $0.12 per share.
Portfolio growth: The portfolio grew 12.4% sequentially as the company used ATM issuance proceeds to add mostly higher-coupon specified pools.
Market backdrop: Management said the quarter featured higher rates, a flatter yield curve, and more cautious Fed expectations, but lower volatility and better mortgage technicals helped Agency RMBS and CMBS perform well.
Capital raising: The company raised about $118 million in the quarter and more than $250 million year-to-date, and said it expects to keep using ATM issuance selectively when it can do so near book value.
Hedging: The hedge ratio stayed high at 97%, and management said it remains comfortable relying mainly on interest rate swaps in an uncertain rate environment.
Outlook: Management stayed constructive on Agency RMBS and Agency CMBS, but said volatility, inflation, monetary policy and geopolitical risks could still pressure spreads in the near term.
