mREIT- How to analyse them

While rising long-term rates may be a two-edged sword for leveraged Mortgage REITs, rising short-term rates are a dagger to the heart. The real risk to a highly leveraged Mortgage REIT is that shot-term rates will rise. Higher short-term rates generally mean smaller spreads between what a leveraged Mortgage REIT earns from its portfolio and the interest it pays to finance the securities bought with borrowed funds. When short-term rates get high enough the yield curve can actually become inverted. That is why most of the hedging done by leveraged Mortgage REITs involves swaps, swaptions and Eurodollar futures positions which attempt to mitigate the effects of a possible increase in short-term interest rates.
Rising short-term rates are even worse for leverage-on-leverage ETNs like MORL that borrow money to buy a portfolio of Mortgage REITs. Recent market activity in MORL and the Mortgage REITs would lead one to believe that an increase in short-term rates was imminent. I think such an increase is not coming any time soon.
 
Full article at:
http://seekingalpha.com/article/1514632-federal-reserve-actually-propping-up-interest-rates-what-this-means-for-mreits