Agency Update

January 8, 2018

Agency prices declined last week, boosting yields higher as investor sentiment remained positive despite a slightly disappointing jobs report.  The US economy added 148,000 jobs in December, undershooting consensus expectations for a gain of 190,000. That said, November data was revised up, the unemployment rate remained unchanged at 4.1% and average hourly earnings ticked up, rising 2.5% year-over-year.  On the week, two-year Agency yields increased 7 bps to 1.99%, 5-year Agency yields improved 7 bps to 2.34%, and yields on 10-year Agencies were higher by 6 bps to 2.82%.


Over the last two weeks, yield spreads for Agency bullets compared to Treasuries were unchanged except for 2-year bullets, which experienced a tightening of 2 bps.  Yield spreads on Agency callables widened 1 to 6 bps, depending on the structure and call tenor.  In the near term, expect agency note spreads to move in recent ranges, although 3-year spreads could be pushed tighter on the roll to a new 3-year Treasury note this week.


The following table reflects the last two week’s total issuance and call activity across GSE issuers:


Issuer Issued Called
Federal Farm Credit Banks      705,000,000                       29,000,000
Federal Home Loan Banks   1,698,000,000
Federal Home Loan Mortgage Corp   1,645,000,000
Federal National Mortgage Association                       –
Federal Agricultural Mortgage Corp          5,000,000
Total   4,053,000,000                       29,000,000



The highlight of the agency issuance calendar in the upcoming week will be Freddie Mac’s announcement on Wednesday of any plans to sell reference notes.


Notable activity last week included:




Ricky Brillard, CPA


Vining Sparks, IBG

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120