Jefferies Downgrades HTS To Hold, Lowers PT To $27

Jefferies is downgrading Hatteras Financial Corp. (NYSE: HTS) to Hold from Buy, and lowers its PT to $27 from $30.

“We anticipate duration extension and Agency MBS price declines to occur over the course of 2011,” Jefferies writes. “Based on this and despite a solid management team and a sound long-term investment strategy, we are downgrading shares of HTS from Buy to Hold.”

“We believe HTS' approach of investing primarily in 5/1 Hybrids will generate attractive returns over the cycle, on average,” Jefferies continues. “However, we do not see much room for upside on Agency MBS asset prices or HTS stock valuation at this particular point in the cycle. In fact, we expect Agency MBS prices to decline over the course of 2011.”

Hatteras Financial closed Tuesday at $29.04.