April 26, 2021
Treasury yields drifted lower in what was a relatively quiet week in the bond market. The 5- and 10-year notes declined by 2 basis points on the week to 0.82% and 1.56%, respectively, while the front end of the curve moved lower by about a basis point. Agency bullets spreads were mostly unchanged while callables widened. This week’s economic calendar is full of market-moving data releases, but the highlight of the week comes Wednesday when the FOMC’s April meeting concludes. The market is still looking for clues as to whether the improvement on the pandemic front and in the economic data will have changed the Fed’s collective thinking regarding timing on tightening policy. Investors expecting some guidance on taper timing will likely be left disappointed.
Agency bullets remain at extremely tight spreads but the Vining Sparks trade desk saw bullets move almost imperceptibly wider last week. Despite moving ever so slightly wider, bullets are still trading basically on top of Treasurys on the front end of the curve and at the slimmest of spreads on the longer end. Because of that, the Vining trade desk continues to move Treasury paper to would-be bullet buyers. Agency callables widened on the week, only marginally for intermediate tenors but by several basis points on the longer end. Most of the agency purchases last week occurred in 3- to 7-year paper, where the curve is at its steepest.
The following table reflects last week’s total issuance and call activity across the primary GSE issuers. Total issuance increased to $3.8 billion and total call volume increased to $3.9 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 Freddie Mac passed on its Reference note. This week Fannie Mae has an issuance slot on Tuesday, April 27th, followed by another Benchmark date next Tuesday, May 4th.
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP