Agency Update

July 6, 2020

Treasury yields were little changed on the front end of the curve last week while yields on the longer end of the curve moved higher.  Most of the economic data last week topped expectations, highlighted by the June jobs report on Thursday that showed 4.8 million jobs gained during the month.  Bond yields and stock indices are both up further so far this morning and the market appears to be focusing more on the recovery than the accelerating coronavirus cases.  Agency bullets tightened on the week while callables mostly widened.  This week’s economic calendar is a little on the light side as the market returns to work following the holiday weekend.

Agency bullets continued to tighten last week and spreads across the curve are now at the tightest levels since the pandemic-led market disruptions from March.  Callable spreads moved higher last week and largely erased the tightening moves seen the previous week for 5- to 10-year maturities.  The 7-year part of the curve continues to be the shortest maturity to reach a 1.00% yield on callables.  Internal activity last week was brisk despite the holiday as depositories and other buyers continue to deploy excess liquidity from bond runoff and heavy call volume.

The following table reflects last week’s total issuance and call activity across the primary GSE issuers.  Total issuance increased to $11.1 billion and call volume was basically halved to $3.6 billion.  Callable owners can continue to expect heavy call volume, and for specific dates and amounts, be sure to log in to the Client Portal on the Vining Sparks website.

There were no major issuance dates scheduled for last week.  Fannie Mae has an upcoming Benchmark slot this Wednesday, and the Federal Home Loan Bank has an announcement slot next Wednesday.

Daniel Anderson

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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