Posted on 10/09/2013 12:52:52 PM PDT by whitedog57
Regulators should boost oversight of the largest real-estate investment trusts that use borrowed money to invest in mortgage-backed securities because rising interest rates may push the firms into asset sales that destabilize markets, the International Monetary Fund said.
A version of that scenario occurred during the rise in rates that began in May, the IMF said. Repercussions might roil the REITs’ lenders, disrupt the $5.3 trillion market in which they invest and damage the broader U.S. economy, according to its Global Financial Stability Report released today.
Here is the report.
Mortgage REITs have suffered since the May 1 surge in sovereign rates, leading the IMF to issue a warning to US regulators.
mtreit10cmt
But if we look at PIMCO’s total return fund, we see the same thing. But the IMF is NOT calling for greater regulation of PIMCO’s funds.
pimcotr
Why does the IMF encourage the US to regulate REITS and not PIMCO?
It’s May 15, 2013. The interest rate on a 10-year Treasury bond is 1.65%. These mortgage REITS are paying a 15% dividend. You don’t have to be a financial wizard to guess that they are a powerkeg waiting to blow, right?
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