Two Harbors Soars 10.9% on Trump's Mortgage Market Move: A Volatile Surge Amid Sector-Wide Optimism

Summary
• Two Harbors (TWO) surges 10.96% to $12.14, hitting an intraday high of $12.53
• Sector peers like AGNC and ARR rally on Trump’s $200B mortgage bond purchase plan
• Options chain shows aggressive bullish positioning with high leverage ratios and implied volatility
• Sector analysts forecast 17% total returns for REITs in 2026 as rate cuts loom

Two Harbors’ explosive 10.96% intraday gain on January 9, 2026, reflects a seismic shift in market sentiment driven by President Trump’s pledge to buy $200 billion in mortgage bonds. The move, aimed at lowering housing costs, has ignited a rally across mortgage REITs, with TWO trading above its 52-week high of $14.28. The stock’s sharp rebound from its intraday low of $11.27 underscores the sector’s sensitivity to policy-driven liquidity shifts.
Trump’s Mortgage Market Intervention Ignites Sector Optimism
President Trump’s announcement to direct Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds directly triggered the surge in Two Harbors. The move, framed as a bid to reduce mortgage rates and housing costs, has rekindled investor confidence in mortgage REITs, which had languished amid high interest rates and elevated prepayment risks. The Federal Housing Finance Agency’s endorsement of the plan further solidified market expectations of lower borrowing costs, pushing traders to reprice risk in the sector. Two Harbors, a leveraged mREIT focused on agency RMBS, stands to benefit from reduced rate volatility and improved prepayment dynamics, making it a focal point for capital inflows.

Mortgage REITs Rally as Sector Leaders Surge
The broader mortgage REIT sector mirrored TWO’s performance, with AGNC Investment Corp (AGNC) rising 2.59% and ARMOUR Residential REIT (ARR) gaining 1.90%. BMO Capital’s forecast of a 17% total return for U.S. REITs in 2026, driven by rate cuts and discounted valuations, has amplified sector-wide optimism. Two Harbors’ 10.96% intraday gain outpaced its peers, reflecting its strategic positioning in agency RMBS and active risk management framework. The sector’s 15% discount to net asset value, as highlighted by BMO, suggests further upside potential as transaction activity accelerates.

Options and ETFs Highlight Aggressive Longs Amid Volatility
• UPRO (3x S&P 500 ETF): 2.36% gain, ideal for leveraged exposure to broader market optimism
• SPXL (3x S&P 500 ETF): 2.30% gain, amplifies sector-wide momentum
• BAI (AI Innovation ETF): 2.29% gain, captures thematic growth in mortgage tech
• 200-day MA: $10.52 (below current price), RSI: 46.15 (neutral), MACD: 0.14 (bullish divergence)
• Bollinger Bands: Price at $12.14 (above upper band of $11.64), signaling overbought conditions

Two Harbors’ technicals suggest a continuation of its bullish breakout. The stock has pierced its 200-day moving average and upper Bollinger Band, with RSI hovering near neutral territory. Short-term traders should monitor the $12.53 intraday high as a critical resistance level. The TWO20260320C13 call option (strike $13, expiration March 20) and TWO20260320C14 (strike $14) offer compelling leverage. The former has a 55.49% implied volatility, 16.19% leverage ratio, and a 0.40 delta, while the latter boasts a 32.82% leverage ratio and 0.2579 delta. Assuming a 5% upside to $12.75, the TWO20260320C13 would yield a 200% payoff (max(0, 12.75 - 13) = $0.75), and the TWO20260320C14 a 362.50% payoff (max(0, 12.75 - 14) = $0.00). Aggressive bulls should target a $12.50 retest of the upper Bollinger Band, with a stop-loss below $11.27 to protect gains.

Backtest Two Harbors Stock Performance
The performance of TWO after an intraday surge of 11% in 2022 has been backtested, and the results show a strategy return of 34.70%, with a benchmark return of 42.97% and an excess return of -8.27%. The strategy has a CAGR of 7.89% and a maximum drawdown of 0.00%, indicating a volatile but potentially profitable strategy.

Two Harbors’ Momentum Unlikely to Subside—Act Now on Sector-Wide Catalysts
Two Harbors’ 10.96% surge is a harbinger of broader sector rotation as Trump’s mortgage market intervention reshapes risk perceptions. The stock’s technicals and options positioning suggest a high-probability continuation of its bullish trend, particularly if the $12.53 level holds. Sector leader AGNC’s 2.59% gain reinforces the narrative of a REIT rebound. Investors should prioritize the TWO20260320C13 call option for leveraged exposure to this momentum, while ETFs like UPRO and SPXL offer diversified amplification. Watch for a breakdown below $11.27 to trigger a reevaluation of the trade, but for now, the sector’s policy-driven tailwinds demand aggressive action.