April 30, 2018
Agency yields increased across the curve during the previous two weeks, with larger changes occurring on longer maturities. Two-year Agency yields increased by 8 bps to 2.53%, 5-year Agency yields improved 9 bps to 2.88%, and yields on 10-year Agencies were higher by 13 bps to 3.26%.
Over the past two weeks, yield spreads for Agency bullets compared to Treasuries were relatively stable with a modest 2 to 4 bps tightening in 1- to 5-year finals. Spreads for callable Agencies tightened 3 to 4 bps on the short end of the curve (2- and 3-year finals) and 10 to 13 bps on maturities 5-years and greater. As seen below, Agency callables with 10-year finals remain appealing from a relative value perspective as current spreads compare favorably to their 12-month averages.
The following table reflects the last two week’s total issuance and call activity across GSE issuers:
On April 17th, Freddie Mac priced a new $2.5 billion 2-year reference note due on April 23, 2020. Fannie Mae skipped its benchmark note issuance slot on April 19th, and FHLB, as expected, passed on its global bond issuance on April 24th. It was FHLB’s third pass year-to-date versus 14 times in all of 2017. There are no large agency bullet issues scheduled for announcement in the upcoming week.
Notable agency activity over the last two weeks included:
Ricky Brillard, CPA
Vining Sparks, IBG