Agency Update

February 25, 2019

The most noteworthy event of last week was the Fed’s release of their January meeting minutes, and all signs pointed to very dovish sentiment among voters.  The Treasury market mostly took the release in stride but yields did end the week slightly lower.  The 2- to 5-year part of the curve is still inverted and the 2- to 10-year spread remained rangebound at approximately 17 basis points.  Agency bullets mostly moved in line with sovereign debt.  Bullet yields for 3- and 5-year maturities fell by approximately 3 basis points to 2.52% and 2.59%, respectively.

Both agency bullets and callable agencies mostly tightened in versus Treasuries.  In the span of roughly 2 months, 3-year bullet spreads have nearly been cut in half and 5-year agency bullets have tightened by half a dozen basis points.  As highlighted in the chart below, agency securities across the curve are near the low levels of the past 12 months.

The below table reflects last week’s total issuance and call activity across the primary GSE issuers.  Total call volume last week was elevated at more than $3.5 billion.

Last week Freddie Mac passed on its 3rd issuance date of the year and has not issued a Reference note since June 2018.  Fannie Mae’s next issuance date is this Tuesday, February 26th.  The next issuance slot for the Federal Home Loan Bank is next Thursday, March 7th.

Daniel Anderson

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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