April 10, 2017
Agency yields were mixed on the week with modest increases on shorter-term maturities and small declines for longer-term maturities. Two-year Agency yields increased by 4 bps to 1.39%, 5-year Agency yields held firm at 2.04%, and yields on 10-year Agencies were lower by 2 bps to 2.78%.
Yield spreads for Agency bullets compared to Treasuries were largely steady. Yield spreads for Agency callables widened 1 to 6 bps, depending on the structure and call tenor. For investors that can handle the optionality, callables are attractive on a spread basis, as yield spreads have improved over the recent lows reached in mid-March (see graph below).
Michael S. Erhardt, CPA
Senior Vice President
Vining Sparks, IBG