Patrick Harden at mREITs notes that there are a number of mortgage REITs looking to jump into agency-backed waters in the next few months, and asks
How many more agency mREITs can the market absorb? ...
While falling interest rates have created a juicy environment for agency mREITs, which only have interest rate risk to manage, too many competitors may cause pass-through certificates and CMOs to become overpriced.
It's an interesting theory, and an interesting find. The theory is interesting, because if correct the agency market is suddenly flooded with buyers, prices will go up -- bringing yields down, and likely mortgage rates with them. It's also interesting because it means that more than a few players are eyeing a play in the MBS space in the months ahead, signaling that there might be more liquidity in the system than some currently think.
Just thinking out loud here, of course.