Recent pull pack in a number of these names stimulated insider buying. Perhaps the largest amount of buying in this name, CYS. The Fund picked up a sizeable stake.
CYS is a mortgage REIT that invests primarily in Agency RMBS. It pays a great 14.05% dividend. With the Fed backing up the housing industry, this is one of the safest investments in an uncertain investment world. The Fed is not likely to let the housing market drop much from here. The Fed is keeping mortgage rates low. It has said that it will keep Fed Funds rates low until mid-2015 and perhaps longer. Operation Twist, which ends at the end of 2012, and the Feds buying of MBS $40B per month for QE3 have succeeded in doing this so far. The Fed is also replacing expiring MBS with new ones. The total in long term securities buying is about $85B per month. The Fed may increase its MBS buying after it ends Operation Twist. However, the Fed is unlikely to crowd mortgage REITs out of the industry because it also wants to foster this industry. This may mean that mortgage rates may go up slightly after the end of the year. This should increase the interest rate spread that mortgage REIT companies can earn on their investments.