What happened

AGNC Investment (AGNC 0.64%) surged 2.6% shortly after the opening bell today and then settled back down during morning trading. As of 12:30 p.m. ET, the stock was up 1.6% to $10.15 per share.

The major indexes were down slightly on Thursday, led by the Dow Jones Industrial Average, which was off about 250 points, or 0.7%, as of the same time.  

So what

AGNC Investment, a mortgage real estate investment trust (REIT), got a bump from some good news on Wednesday that was spiked with a little not-so-good news. The good news is that mortgage rates dropped again last week, as the 30-year fixed mortgage rate decreased to 6.49%, from 6.67% the previous week. Over the past four weeks, it has dropped 57 basis points.

The speech by Federal Reserve Chair Jerome Powell on Wednesday at the Brookings Institution, where he indicated the Fed would be looking to slow the pace of rate hikes, could certainly help push mortgage rates even lower. 

Investors may have seen the mortgage rate drop as a positive trend for AGNC Investment, which generates revenue by buying mortgage-backed securities and collecting the interest. Ideally, lower rates should improve purchasing power for prospective homebuyers and spur more mortgage activity.

However, now for the not-so-good news: Mortgage applications decreased last week, according to the Mortgage Bankers Associationʻs weekly survey.

From the previous week, mortgage applications decreased 0.8% on a seasonally adjusted basis and 33% on an unadjusted basis. Refinance activity dropped 13% from the previous week and was 86% lower than the same week a year ago. The one positive was a 4% seasonally adjusted increase in purchase activity.

Now what

This remains a very difficult market for homebuyers and the mortgage industry in general, and things likely won't start to improve until late 2023 of 2024.

As for AGNC Investment, spreads between mortgage-backed securities and Treasury bonds have widened to historically wide levels and the company's book value has plummeted. But as CEO Peter Federico said on the third-quarter earnings call, there are bright spots on the horizon. 

"First, as spreads widen the book value of our existing portfolio declines, as has been the case this year. On the positive side, however, wider spreads also enhance the future value of our business by improving the go-forward return on our portfolio," Federico said. 

AGNC pays out a monthly dividend of $0.12 at a yield of 14.1% -- so it is a good dividend stock, as REITs are required to pay out a certain percentage of earnings in dividends. But be cautioned that AGNC has had to cut its dividend twice since 2016, typically when yields get too high, so that is something to watch.