Updating AG Mortgage Investment Trust Notes: Only One Would I Buy

An analyst recommends AG Mortgage Investment Trust's (MITT) 9.5% Senior Note MITP (maturing 2029) over its counterpart MITN, citing MITP's significantly higher Yield to Call (YTC) as adequate compensation for its unrated status and low coverage risk. This highlights a specific high-yield opportunity within the mREIT debt market, noting that while MITT's senior notes are considered safer than its preferreds, investors must weigh yield against risk, particularly given the double-edged impact of interest rate changes on the sector.

Analysis

AG Mortgage Investment Trust, Inc. (MITT) presents a specific high-yield opportunity through its two 9.5% Senior Notes, MITN and MITP, both maturing in 2029. A key distinction is the analyst's "Buy" rating on MITP, driven by its significantly higher Yield to Call (YTC) compared to MITN. This superior YTC is positioned as adequate compensation for the notable risks, which include the notes being unrated by major credit agencies and having low-coverage risk. Within the company's capital structure, these senior notes are explicitly identified as a safer investment than MITT's preferred shares, a common consideration for risk-averse income investors in the mREIT sector. The analysis also highlights the double-edged nature of interest rate movements for the company, which can simultaneously affect funding costs and portfolio income, making the macro environment a critical variable for the performance of these fixed-income instruments.

Key Decisions for Investors

• Investors seeking high-yield mREIT debt should consider MITP over the similar MITN, as its superior Yield to Call offers a more attractive compensation for the call and credit risks involved.
• A thorough due diligence on credit risk is necessary, as the 9+% yield on these notes reflects their unrated status and low coverage, requiring investors to have a high tolerance for such risks.
• Monitor interest rate trends and call activity closely, as shifts in rates can materially impact MITT's profitability and the valuation of these notes, while call risk is a primary determinant of the ultimate return.
• For a more conservative allocation within AG Mortgage Investment Trust's capital structure, these senior notes represent a less risky alternative to the company's preferred stock, aligning with a strategy of prioritizing debt over equity-like instruments in the current market.