July 9, 2018
The Treasury curve continued to flatten last week, and Agency yields moved mostly in line with US sovereign debt yields. Two- and three-year Agency bullet yields increased 1 basis point to 2.60% and 2.70%, respectively, and 5-year bullet yields decreased 2 bps to 2.80%. Ten-year Agency bullet yields fell 4 bps to 3.12%.
Yield spreads for Agency bullets versus Treasuries were unchanged across the curve, while spreads on callable Agencies were mixed. Spreads for callables declined by 3 bps for 3-year maturities as well as 10-year maturities, while spreads widened by 2 bps for callable maturities of 5 years. With 5-year callable spreads still near their wides of the past 5 years, 5-year callables continue to appear attractive from a relative value basis. On average 5-year callables are more than 15 bps wider than the 12-month average.
The following table reflects last week’s total issuance and call activity across GSE issuers:
With the holiday last week there were no large Agency bullet issues scheduled for announcement. Tomorrow, July 10th, Fannie Mae is scheduled to announce any plans to issue Benchmark securities. Next Tuesday, July 17th, marks the next slot for Freddie Mac to issue Reference Notes.
Senior Vice President