August 6, 2018
Treasuries in the belly of the curve rallied last week as maturities of 2-, 3-, and 5-year Notes declined by 3 basis points apiece. Agency bullet yields moved in line with Treasuries and remain near the highs for the year. Three-year bullets are trading at 2.80%, five-year bullets at 2.90%, and ten-year bullets at 3.31%.
Yield spreads for Agency bullets versus Treasuries were unchanged and remain tight, specifically for front-end product. Bullets appear to be attractive sale candidates for investors in need of liquidity. Spreads on callable Agencies mostly widened on the week after tightening the prior two weeks. Callable spreads widened by 1-2 basis points for maturities of 2 to 10 years, regardless of structure and tenor. Less-structured callable yields are essentially at the highest they have been in this rate cycle, as highlighted in the two charts below.
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 will announce any plans to issue Global securities this Tuesday, August 7th. Next Tuesday, August 14th, is the next date for Fannie Mae to announce plans to issue Benchmark securities.
Senior Vice President