Residential Mortgage REITs in the second quarter are generally likely to continue seeing results more or less in line with the prior one despite a somewhat volatile operating environment between April and June, according to some analysts.

Keefe, Bruyette & Woods (KBW) analysts noted in pre-results commentary Wednesday that all the agency MBS REITs have indicated their dividends are flat or up for the quarter. (KBW’s disclosures indicate it has had or expects to have business dealings with at least five of the 11 REITs it discusses in its report: Annaly and its Chimera affiliate, Capstead, Hatteras and Invesco.)

But while KBW analysts are relatively optimistic about agency REITs, they said in the second quarter there would continue to be lower book values for companies that invest in credit risk through the nonagency sector, where prices have come under pressure due in part to the Fed’s relatively large Maiden Lane auctions. The auctions were eventually suspended, causing a relative increase in book value. However this took place after the second quarter ended, the KBW report noted. (Nonagency and agency REIT strategies often move in opposite directions and a company may deploy with the aim of balancing its risks.)

While the KBW analysts are positive on the sector due to dividend expectations, they note that there could be limited upside in share prices.

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