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How to Approach NLY Stock as Mortgage Rates Surge to a 7-Month High?
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Key Takeaways
Annaly faces pressure as rising mortgage rates and inflation concerns challenge mREIT earnings and activity.
NLY's $104.7B portfolio, led by Agency MBS, supports liquidity and risk balance across rate cycles.
Annaly's strong liquidity and dividend payouts persist, but valuation and volatility risks remain.
Annaly Capital Management’s (NLY - Free Report) performance and prospects remain closely tied to movements in mortgage rates and Federal Reserve policy.
Mortgage rates are facing a volatile trend fueled by concerns about inflation and the broader economic outlook. The 30-year fixed mortgage rates rose in recent weeks to the highest level in the past seven months, reversing the previous declines. According to a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.38% as of March 26, 2026, up from the prior week, when it averaged 6.22%. A year ago, at this time, the rates averaged 6.65%.
The threat of higher-for-longer oil prices because of the conflict in the Middle East continues to keep Treasury yields elevated, leading to a rise in mortgage rates. Higher mortgage rates, coupled with affordability constraints and economic uncertainty, have pushed potential homebuyers to the sidelines. This will increase operational and financial challenges for mREITs such as Annaly, AGNC Investment Corporation (AGNC - Free Report) and Starwood Property Trust, Inc. (STWD - Free Report) and decrease the gain on sale margin and new investment activities.
Though the central bank lowered interest rates in the last two years, it has kept them steady so far in 2026, given geopolitical tension and persistent inflation. This will increase earnings pressure for highly leveraged mREITs, like Annaly. This scenario will compel mREITs, including NLY, AGNC Investment and STWD, to reduce the dividend to a level that can be covered by earnings. This may result in capital outflows from the industry, resulting in greater book value declines for companies in the near term.
Given the concern, many investors must be wondering how to approach the NLY stock now. To answer this, it is essential to delve into the details and evaluate various factors at play to analyze its investment worthiness.
Factors Driving NLY Performance
Portfolio Diversification: Annaly operates a diversified investment platform spanning Agency mortgage-backed securities (“MBS”), residential credit and mortgage servicing rights (“MSR”), which helps to balance income generation and risk management across rate cycles.
As of Dec. 31, 2025, the company’s investment portfolio totaled $104.7 billion. Of this, $92.9 billion comprised highly liquid Agency MBS, most of which carry actual or implied ‘AAA’ ratings. These securities are largely backed by government-sponsored enterprises, providing liquidity and credit stability during periods of market volatility. Management also remains positive on its 2026 MBS outlook, supported by easing rate volatility, a steeper yield curve and favorable supply-demand dynamics. The company continues to allocate more toward Agency MBS, given their attractive risk-adjusted returns relative to funding costs.
The company is also expanding its MSR platform to enhance earnings visibility. In October 2025, Annaly entered into a long-term subservicing and MSR purchase agreement with PennyMac Financial Services. This strategic partnership broadens its servicing capabilities and is expected to support operational efficiency over time.
Alongside Agency MBS and MSR, residential credit investments contribute to return diversification. In recent years, Annaly exited its commercial real estate and Middle Market Lending businesses to concentrate on core housing finance operations, allowing for more focused capital deployment and strengthened risk management.
Hence, by maintaining diversified exposure across Agency MBS, residential credit and MSR, Annaly is positioned to capitalize on opportunities in housing finance while limiting concentration risk across rate cycles.
Strong Liquidity Position Aids Capital Distribution: The company has maintained a solid liquidity position. As of Dec. 31, 2025, the company had $9.4 billion of total assets available for financing, including $6.1 billion in cash and unencumbered Agency MBS. This sizable liquidity buffer equips the company to navigate periods of market stress and capitalize on attractive deployment opportunities.
NLY also continues to return capital to its shareholders through regular dividends. In March 2025, Annaly increased its quarterly cash dividend by 7.7% to 70 cents per share. Over the past five years, NLY has raised its dividend once. The company’s current dividend yield stands at 13.5%. Notably, AGNC and STWD offer yields of 14.9% and 11.3%, respectively.
Annaly Capital Management Inc Dividend Yield (TTM)
In addition to dividends, the company has a $1.5 billion share repurchase program authorized on Jan. 31, 2025, effective through Dec. 31, 2029. Although no shares have been repurchased under this plan to date, the company’s solid liquidity position supports the sustainability of its capital distribution activities.
Reading the Signals: What NLY’s Latest Estimates Indicate
The Zacks Consensus Estimate for Annaly’s 2026 and 2027 sales implies year-over-year growth of 74% and 0.3%, respectively.
Sales Estimates
Image Source: Zacks Investment Research
Further, the Zacks Consensus Estimate for 2026 earnings implies year-over-year growth of 1.4%, while for 2027, it indicates a marginal decline.
Earnings Estimates
Image Source: Zacks Investment Research
How to Play Annaly Stock Now?
Shares of Annaly have gained 2.3% over the past year, outperforming the industry's 6.5% decline. In comparison, AGNC Investment has surged 1.2%, while STWD Property Trust has lost 13.8% over the same time frame.
Price Performance
Image Source: Zacks Investment Research
The company’s fundamentals remain broadly supportive, underpinned by its diversified portfolio mix, sizable Agency MBS allocation and solid liquidity buffer. With mortgage rates trending lower and funding conditions expected to ease over time, Annaly’s financial profile stands to improve further.
However, from a valuation standpoint, Annaly appears expensive relative to the industry. The stock is currently trading at a forward 12-month price-to-tangible book (P/TB) multiple of 1.01X, higher than the industry average of 0.91X. Meanwhile, the company’s peers, AGNC and STWD, trade at forward 12-month P/TB multiples of 1.07X and 0.99X, respectively.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
Additionally, risks such as mortgage market volatility, unfavorable yield curve movements and broader financial instability could weigh on Annaly’s performance. As such, prospective investors might consider waiting for a more attractive entry point.
View the Zacks #1 Rank List
Image: Bigstock
How to Approach NLY Stock as Mortgage Rates Surge to a 7-Month High?
Key Takeaways
Annaly Capital Management’s (NLY - Free Report) performance and prospects remain closely tied to movements in mortgage rates and Federal Reserve policy.
Mortgage rates are facing a volatile trend fueled by concerns about inflation and the broader economic outlook. The 30-year fixed mortgage rates rose in recent weeks to the highest level in the past seven months, reversing the previous declines. According to a Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.38% as of March 26, 2026, up from the prior week, when it averaged 6.22%. A year ago, at this time, the rates averaged 6.65%.
The threat of higher-for-longer oil prices because of the conflict in the Middle East continues to keep Treasury yields elevated, leading to a rise in mortgage rates. Higher mortgage rates, coupled with affordability constraints and economic uncertainty, have pushed potential homebuyers to the sidelines. This will increase operational and financial challenges for mREITs such as Annaly, AGNC Investment Corporation (AGNC - Free Report) and Starwood Property Trust, Inc. (STWD - Free Report) and decrease the gain on sale margin and new investment activities.
Though the central bank lowered interest rates in the last two years, it has kept them steady so far in 2026, given geopolitical tension and persistent inflation. This will increase earnings pressure for highly leveraged mREITs, like Annaly. This scenario will compel mREITs, including NLY, AGNC Investment and STWD, to reduce the dividend to a level that can be covered by earnings. This may result in capital outflows from the industry, resulting in greater book value declines for companies in the near term.
Given the concern, many investors must be wondering how to approach the NLY stock now. To answer this, it is essential to delve into the details and evaluate various factors at play to analyze its investment worthiness.
Factors Driving NLY Performance
Portfolio Diversification: Annaly operates a diversified investment platform spanning Agency mortgage-backed securities (“MBS”), residential credit and mortgage servicing rights (“MSR”), which helps to balance income generation and risk management across rate cycles.
As of Dec. 31, 2025, the company’s investment portfolio totaled $104.7 billion. Of this, $92.9 billion comprised highly liquid Agency MBS, most of which carry actual or implied ‘AAA’ ratings. These securities are largely backed by government-sponsored enterprises, providing liquidity and credit stability during periods of market volatility. Management also remains positive on its 2026 MBS outlook, supported by easing rate volatility, a steeper yield curve and favorable supply-demand dynamics. The company continues to allocate more toward Agency MBS, given their attractive risk-adjusted returns relative to funding costs.
The company is also expanding its MSR platform to enhance earnings visibility. In October 2025, Annaly entered into a long-term subservicing and MSR purchase agreement with PennyMac Financial Services. This strategic partnership broadens its servicing capabilities and is expected to support operational efficiency over time.
Alongside Agency MBS and MSR, residential credit investments contribute to return diversification. In recent years, Annaly exited its commercial real estate and Middle Market Lending businesses to concentrate on core housing finance operations, allowing for more focused capital deployment and strengthened risk management.
Hence, by maintaining diversified exposure across Agency MBS, residential credit and MSR, Annaly is positioned to capitalize on opportunities in housing finance while limiting concentration risk across rate cycles.
Strong Liquidity Position Aids Capital Distribution: The company has maintained a solid liquidity position. As of Dec. 31, 2025, the company had $9.4 billion of total assets available for financing, including $6.1 billion in cash and unencumbered Agency MBS. This sizable liquidity buffer equips the company to navigate periods of market stress and capitalize on attractive deployment opportunities.
NLY also continues to return capital to its shareholders through regular dividends. In March 2025, Annaly increased its quarterly cash dividend by 7.7% to 70 cents per share. Over the past five years, NLY has raised its dividend once. The company’s current dividend yield stands at 13.5%. Notably, AGNC and STWD offer yields of 14.9% and 11.3%, respectively.
Annaly Capital Management Inc Dividend Yield (TTM)
Annaly Capital Management Inc dividend-yield-ttm | Annaly Capital Management Inc Quote
In addition to dividends, the company has a $1.5 billion share repurchase program authorized on Jan. 31, 2025, effective through Dec. 31, 2029. Although no shares have been repurchased under this plan to date, the company’s solid liquidity position supports the sustainability of its capital distribution activities.
Reading the Signals: What NLY’s Latest Estimates Indicate
The Zacks Consensus Estimate for Annaly’s 2026 and 2027 sales implies year-over-year growth of 74% and 0.3%, respectively.
Sales Estimates
Image Source: Zacks Investment Research
Further, the Zacks Consensus Estimate for 2026 earnings implies year-over-year growth of 1.4%, while for 2027, it indicates a marginal decline.
Earnings Estimates
Image Source: Zacks Investment Research
How to Play Annaly Stock Now?
Shares of Annaly have gained 2.3% over the past year, outperforming the industry's 6.5% decline. In comparison, AGNC Investment has surged 1.2%, while STWD Property Trust has lost 13.8% over the same time frame.
Price Performance
Image Source: Zacks Investment Research
The company’s fundamentals remain broadly supportive, underpinned by its diversified portfolio mix, sizable Agency MBS allocation and solid liquidity buffer. With mortgage rates trending lower and funding conditions expected to ease over time, Annaly’s financial profile stands to improve further.
However, from a valuation standpoint, Annaly appears expensive relative to the industry. The stock is currently trading at a forward 12-month price-to-tangible book (P/TB) multiple of 1.01X, higher than the industry average of 0.91X. Meanwhile, the company’s peers, AGNC and STWD, trade at forward 12-month P/TB multiples of 1.07X and 0.99X, respectively.
Price-to-Tangible Book TTM
Image Source: Zacks Investment Research
Additionally, risks such as mortgage market volatility, unfavorable yield curve movements and broader financial instability could weigh on Annaly’s performance. As such, prospective investors might consider waiting for a more attractive entry point.
Annaly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.