January 22, 2018
Agency yields crept higher last week, with the 10-year hitting a level not seen since December 2016. As shown on the chart below, yields are near or at their 12-month highs across all tenors. For the week, two-year Agency yields increased by 6 bps to 2.09%, 5-year Agency yields improved 8 bps to 2.51%, and yields on 10-year Agencies were higher by 9 bps to 3.00%.
For the third consecutive week, yield spreads for Agency bullets compared to Treasuries were unchanged. Spreads for callable Agencies tightened 1 to 5 bps on the short end of the curve (2- and 3-year finals) and 4 to 7 bps on maturities of 5-years and greater. In the near term, we could see some additional tightening of agency spreads, particularly for 2- and 5-year notes on the roll to new Treasury issues.
The following table reflects the last two week’s total issuance and call activity across GSE issuers:
|Federal Farm Credit Banks||295,000,000||–|
|Federal Home Loan Banks||220,500,000||25,000,000|
|Federal Home Loan Mortgage Corp||173,000,000||105,000,000|
|Federal National Mortgage Association||–||–|
|Federal Agricultural Mortgage Corp||33,000,000||–|
On Thursday, Fannie Mae announced the pricing of its new $2B five-year benchmark note due on January 19, 2023. The highlights of the agency coupon calendar in the upcoming week will be Fannie Mae’s announcement on Wednesday of any plans to sell benchmark notes, which will likely be a pass based on the recent five-year print.
Notable activity last week included:
- 20.9M of FFCB callable in January 2019; maturing in 5 to 10 years
- 19M of FHLB callable in February 2019; maturing in 4 to 5 years
- 15M of FFCB callable in January 2019; maturing in 5 to 10 years
- 9.3M of FHLB callable in January or February 2019; maturing in 3 to 5 years
- 4.3M of FHLB bullets; maturing in 1 to 2 years
- 7M of FHLMC callable in January 2019; maturing in 5 years
Ricky Brillard, CPA
Vining Sparks, IBG