December 3, 2018
Treasuries rallied last week and continued to flatten modestly. Agency bullets on the short end of the curve moved in line with Treasuries while bullets in the intermediate and longer end of the curve widened. Agency bullet yields for terms of 2 to 5 years fell by 2 to 3 basis points. Yields on 3- and 5-year bullets declined to 2.89% and 2.95%, respectively.
Agency bullets widened somewhat versus Treasury debt. Agency issuers still have healthy demand for auction debt but, with fairly tepid demand from buyers in general, spreads have widened out in recent weeks. Last week bullets with 3-year terms cheapened by 1 basis point while 5- and 10-year bullets cheapened by approximately 3 basis points. Some bullet issues in the 5 year part of the curve are trading as wide as +17 to Treasuries, the cheapest levels at which they have traded since mid-2016. Callable bonds across the curve generally widened out as well, depending on term and structure. Given the recent bond market rally, most agency yields are essentially at the same levels as the beginning of November.
The following table reflects last week’s total issuance and call activity across GSE issuers:
Last week Freddie Mac had two issuance slots, the 27th and 29th, and passed on both dates. Freddie Mac also has an issuance date this Wednesday. Today, December 3rd, is the next announcement date for the Federal Home Loan Bank to issue Global securities. Its next issuance slot is next Tuesday, the 11th.
Senior Vice President, Investment Strategies
Vining Sparks IBG, LP