I Wouldn’t Touch These 2 Mortgage REITs, Even With Yields Over 16%. Here’s the 10%-Yielder I’d Buy Right Now.

The 10-year Treasury yield recently reached nearly 5.3%, pressuring fixed-rate mortgage REITs AGNC and Annaly, whose yields exceed 16% and whose borrowing costs may rise faster than portfolio income. Ladder Capital, yielding more than 10%, says each 25–50bp rate increase could add about $0.02 per share to quarterly earnings; 88.9% of its loan portfolio is floating-rate, while its debt is fixed-rate. Ladder also faces commercial-property credit risk, including an $8 million office-loan foreclosure and a $13.4 million loan placed on non-accrual in Q2.

Analysis

The key distinction is not simply “floating-rate wins, fixed-rate loses”: it is asset repricing versus liability repricing, hedging, and borrower solvency. LADR’s stated rate sensitivity is attractive only if loan coupons reset faster than its funding costs and credit losses do not consume the added spread. Higher rates can lift near-term income while making commercial borrowers’ debt service and refinancing materially harder over the next 6–18 months; floating-rate exposure transfers rate risk to borrowers, not away from the portfolio. Office concentration and non-accrual/foreclosure trends are therefore more important than the headline earnings sensitivity.

For AGNC Investment and Annaly Capital Management, agency guarantees limit mortgage credit losses, not duration, negative convexity, repo funding, or MBS-spread risk. A stabilization or decline in rates could support book values and spreads, so elevated yields alone do not establish a short. Annaly’s servicing assets may also partly offset rate exposure; do not treat it as a pure Agency-MBS proxy. Near term, the rate path and MBS spreads dominate; over 1–3 months, earnings sensitivity and dividend coverage matter; structurally, CRE refinancing stress is the larger risk to LADR. The contrarian risk is that the market may be pricing rate sensitivity as durable growth while underpricing lagged credit deterioration. Verify LADR’s hedges, debt maturities, loan floors, and credit migration before underwriting management’s per-share estimate.

Key Decisions for Investors

• Treat LADR as a conditional, modest-sized income/growth position—not a clean rate hedge. Add only after confirming that asset resets outpace funding repricing and that non-accruals, delinquencies, and realized losses remain contained; reassess if credit deterioration accelerates or dividend coverage weakens.
• Avoid buying NLY solely for its yield, but do not short it just because rates are high. Track book value per share, repo/funding costs, MBS spreads, and dividend coverage; a sustained reversal in rates or tighter MBS spreads could support a sharp recovery.
• For relative value, consider a small long LADR / short NLY pair only if current valuation, borrow availability, and rate sensitivities support it. It is not duration-neutral: reduce or exit if commercial credit spreads widen materially, LADR’s non-accrual balance rises, or NLY’s book value and funding metrics stabilize faster than expected.
• Catalyst watch over the next 1–3 months: compare LADR’s realized net-interest contribution with its stated rate sensitivity and monitor loan extensions, office exposure, and refinancing outcomes. Missing data to verify before sizing: current hedge book, debt repricing schedule, loan maturity ladder, and updated dividend coverage.