Mortgage REIT 2Q26 Preview: Playing the Long Game; Establishing 2027 PTs; Upgrading ABR to N, Downgrading AGNC to N and KREF to UW; Rest Unchanged

Research evidence excerpt

Mortgage REIT 2Q26 Preview: Playing the Long Game; Establishing 2027 PTs; Upgrading ABR to N, Downgrading AGNC to N and KREF to UW; Rest Unchanged

J P M O R G A N North America Equity Research

17 July 2026

Mortgage REIT 2Q26 Preview

Playing the Long Game; Establishing 2027 PTs;

Upgrading ABR to N, Downgrading AGNC to N and

KREF to UW; Rest Unchanged

The defining shift since our last sector outlook is the market's pivot from Consumer Finance

ACanticipating rate cuts to bracing for higher-for-longer, and potentially higher-from- Richard Shane

here. Persistent inflation and fiscal concerns have kept the front end elevated, and (1-415) 315-6701

our U.S. Economics team expects the Federal Reserve to remain on hold through richard.b.shane@jpmorgan.com

at least 3Q27, with rate hikes a real possibility if inflation continues to exceed Hong Zhang

target. The market has begun to price a higher probability of a hike by year-end (1-212) 622-6416

2026, a hawkish repricing that has lifted front-end yields sharply in 2Q26 and hongliang.zhang@jpmorgan.com

J.P. Morgan Securities LLC

driven a bear flattening of the curve, with near-term risks still skewed towards

higher yields. The implications are not uniform across our coverage. For

residential MREITs, higher rates are a double-edged sword: elevated mortgage The authors wish to thank Prakhar Rai, of

rates reduce prepayment risk, but a flatter curve can pressure carry. For CREITs, the J.P. Morgan Global Research Center,

the removal of rate-cut expectations is a positive for near-term NII given their

for contributions to this report.

asset-sensitive, floating-rate books, but the flip side is that borrowers get no relief

on debt service, keeping credit under pressure and cap rates elevated. On balance,