August 13, 2018
Economic uncertainty in Turkey caused a flight to quality, sending Treasury yields down at the end of the week. Agency bullet yields moved in line with Treasuries. Three-year bullet yields declined 5 basis points to 2.75%, five-year bullet yields fell 7 basis points to 2.83%, and ten-year bullets fell by 8 basis points to 3.22%.
Yield spreads for Agency bullets versus Treasuries were unchanged week-over-week and still appear relatively tight, particularly on the front end of the curve. Bullets would still be attractive sale candidates for investors seeking liquidity. Spreads on callable Agencies continued their recent widening trend. Callable issues cheapened up by 3-4 basis points for maturities of 3 to 10 years, regardless of call structure, and look relatively attractive if investors can take on the optionality. Less-structured five-year callable Agencies are trading just above 3.30% and have traded in an 8 basis point range going back to the beginning of June.
The following table reflects last week’s total issuance and call activity across GSE issuers:
There were no large agency bullet issues scheduled for announcement last week. The Federal Home Loan Bank passed on its issuance date last Tuesday and has now passed 7 out of its last 10 slots so far this year. Fannie Mae will announce any plans to issue Benchmark securities on this Tuesday, August 14th. Next Monday is Freddie Mac’s next date to announce issuance of Reference notes.
Senior Vice President