However, the negative effect of higher short-term rates could be somewhat offset by quickly rising long-term rates as mREITs benefit from a steeper yield curve and arbitrage the wider spread.
MORT and REM, like other REIT assets become more attractive when yields on other fixed-income assets are pushed down. On the bright side for REM and its investors is the fact that the ETF’s dividend is expected to rise for the first time since 2014.
“The year-to-date total return on REM of 18.7% is what could have been expected given that there have been no rate increases by the Federal Reserve in 2016. In January 2016, even those most bearish on REM and the mREITs would have conceded that if there were no rate increases by the Federal Reserve this far into 2016, then REM would have had a high total return at this point in time,” adds Seeking Alpha.
For more information on real estate investment trusts, visit our REITs category.