August 23, 2021
Last week’s headlines were dominated by the calamitous conclusion to the war in Afghanistan, rather disappointing retail sales, and the most concrete timeline on the Fed’s tapering plan received to date. The July FOMC minutes revealed that most Fed officials favor beginning the taper process sometime this year, perhaps a bit sooner than many had expected, yet bond yields ended the week little changed. The 10-year yield fell by 2 basis points while 3- and 5-year notes were up a basis point on the week. Agency bullets tightened versus Treasurys while callable spreads were mostly unchanged. There are several meaningful economic data releases scheduled for this week but most bond investors are likely the most interested in hearing Fed Chair Jay Powell’s speech at the Fed’s Jackson Hole symposium.
Agency bullets tightened by about a basis point for maturities out to approximately 5 years, while bullets in the 10-year part of the curve widened by a basis point. Callable spreads were little changed on the week except for 5-year paper, which tightened by a basis point. With agency bullets tightening, the Vining Sparks trade desk saw Treasury activity pick back up, including some that sold into the latest bond rally to harvest gains.
The following table reflects last week’s total issuance and call activity across the primary GSE issuers. Total issuance increased to $3.5 billion and call volume increased to $4.5 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.
As expected, Freddie Mac passed on its issuance slot last week. The Federal Home Loan Bank also has an issuance date this Wednesday, August 25th. Fannie Mae will follow with a Benchmark issuance slot next Wednesday, September 1st.
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP