Agency Update

August 16, 2021

Through the first half of last week, it looked like Treasury yields had reversed a months’ long slide and begun heading higher.  The bounce in yields was short-lived, and the much weaker than expected consumer confidence report Friday sent bond yields sharply lower.  The 10-year ended the week down 2 basis points to 1.28%, while 3- and 5-year notes closed Friday 1 to 2 basis points higher.  The events in Afghanistan over the weekend are further propelling bonds to rally so far this morning.  Agency bullet spreads were unchanged on the week while callables tightened in.  This week’s calendar is a bit on the lighter side and features July retail sales tomorrow (Tuesday) and the July FOMC minutes on Wednesday.

Agency bullet spreads were little changed on the week after widening to the highest levels since February the prior week.  Agency callables tightened last week, by 1 to 2 basis points on the front end of the curve and by approximately 4 basis points for 10-year terms.  As can be seen in the graphs below, yields on 3- and 5-year callables have been practically unchanged for months, despite fluctuations in Treasury yields.  Last week activity was very strong internally, and buyers were seeking both bullets and callables across the yield curve.

The following table reflects last week’s total issuance and call activity across the primary GSE issuers.  Total issuance increased to $2.3 billion and call volume increased to $3.3 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 both the Federal Home Loan Bank and Freddie Mac passed on their benchmark note slots.  Freddie Mac has another issuance date this Wednesday, August 18th.  The Federal Home Loan Bank also has another issuance date next Wednesday, August 25th.

Daniel Anderson

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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