Morning Report: New Rez files to IPO its lending arm

Vital Statistics:

S&P futures357218.6
Oil (WTI)42.830.31
10 year government bond yield 0.85%
30 year fixed rate mortgage 2.84%

Stocks are higher this morning on further positive vaccine news. Bonds and MBS are flat.

This will be a short week with the Thanksgiving holiday on Thursday and an early close on Friday. We will get some house price data with FHFA and Case-Shiller tomorrow, and will get the second estimate for third quarter GDP on Wednesday.

New Rez filed confidential docs with the SEC to IPO its mortgage lending business. The company has exited non-QM lending for the most part and is now focused on retail consumer direct conforming. Given all the activity in the mortgage origination space the spinoff makes sense. New Rez is still treated more or less as a mortgage REIT and trades on its book value and dividend yield. By spinning off a small amount (say 15% or so), New Rez hopes investors will value the the company at more than the book value of its investment portfolio. Hedge fund guys call these stub trades, and they were big back in the 90s when people realized you could add a dozen PE multiples by adding “dot com” to your corporate moniker.

JP Morgan is warning of a possible recession early next year. The bank sees GDP contracting 1% in the first quarter. For some reason, the first quarter is typically the weakest for the US and academics have pondered whether this is just a weird economic tic or a statistical measurement issue.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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