The biggest issue for Annaly Capital is that the entire mortgage REIT industry is facing unprecedented interest rate pressure. Mortgage REITs aim to borrow money at the lowest short-term rate possible and use this capital to purchase higher-yielding long-term assets, such as mortgage-backed securities (MBS). With the Fed's historic pace of rate hikes, short-term borrowing costs have soared. And when coupled with an inverted yield curve, Annaly is facing a challenging operating environment.