February 22, 2021
Treasury yields marched higher again last week, adding to the rate moves seen the week before. The 10-year ended Friday at 1.34%, up 12 basis points from the week prior and the highest closing level since before the pandemic. The 5-year finally broke above 50 basis points for the first time since last March and closed Friday up 9 basis points at 0.58%. The precipitous drop in COVID-19 cases since the January peak plus the stronger than expected economic data last week yet still talk of more stimulus appear to be driving the move in rates. Agency bullets and callables largely moved in line with Treasury notes. This week’s calendar is another busy one on the data front, and the market will be keenly tuned to Jay Powell’s testimony before Congress Tuesday and Wednesday. With all the data releases scheduled for this week plus Powell’s comments, portfolio managers can expect the heightened volatility to continue.
Last week agency bullets mostly moved in lockstep with Treasurys and remain at all-time tights across the curve. Callables spreads were practically unchanged with only longer 15-year maturities tightening marginally. Demand remains strong for bullets while both primary and secondary supply is thin, keeping spreads at all-time tight levels. Following the market selloff over the couple of weeks, discount callables will likely be the focus this week. Most of the trade activity this past week was in both bullets and callables in the 5- to 7-year part of the curve.
The following table reflects last week’s total issuance and call activity across the primary GSE issuers. Total issuance declined to $4.8 billion while call volume dipped to $5.0 billion. Callable owners can continue to expect heavy call volume, and for specific dates and amounts, be sure to log in to the Client Portal on the Vining Sparks website.
Last week Freddie Mac passed on its Reference slot just as it has all year. Fannie Mae has a Benchmark slot this Wednesday and another coming next Wednesday.
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP