April 12, 2021
Treasury yields declined last week despite the upbeat economic data as the Fed continues to convey patience on adjusting their highly accommodative monetary policy. The 10-year yield declined by 6 basis points on the week to 1.66% while the 5-year yield gave up the 11-basis point increase from the week before, ending the week at 0.86%. Agency bullets mostly moved in line with Treasurys while callables widened on the week. This week’s economic calendar is a busy one with inflation numbers coming Tuesday, Fed Chair Powell scheduled to speak Wednesday, and retail sales on Thursday. After severe weather impacted the February data, the market expects a strong rebound in the March reports. In addition to the economic figures, Q1 corporate earnings season begins this week with several big banks scheduled to report.
Agency bullets largely moved in line with Treasurys and bullets continue to trade at all-time tight spreads. As written here last week, spreads on bullet paper are between +0 to +2 basis points out to approximately 7 years. Agency callables widened on the week after tightening the week before. Nearly all customer purchases last week occurred in the 4- to 7-year portion of the yield curve, the longer end of which appears to be the tail end of the steepest portion of the curve. With yields lower, the demand for bullets and Treasurys slacked off last week until Friday when the market sold off a bit.
The following table reflects last week’s total issuance and call activity across the primary GSE issuers. Total issuance fell to $2.9 billion while total call volume increased to $3.0 billion. For specific call dates and amounts for individual bond portfolios, be sure to log in to the Client Portal on the Vining Sparks website.
Last week Fannie Mae passed on its Benchmark slot. The Federal Home Loan Bank has a Global issuance date this Wednesday, April 14th. Freddie Mac has its only Reference note slot of April next Wednesday, the 21st.
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP