Agency Update

June 12, 2017

Agency yields increased 2 to 9 bps last week, with larger movements occurring on longer maturities.  On the week, two-year Agency yields increased 6 bps to 1.41%, 5-year Agency yields increased 7 bps to 1.88%, and yields on 10-year Agencies climbed by 9 bps to 2.61%.

Yield spreads for Agency bullets compared to Treasuries were unchanged with the exception of 1-year bullets, which experienced a tightening of 2 bps.  Limited supply continues to weigh on the front end of the Agency yield curve.

Yield spreads on Agency callables were relatively stable, tightening 1 to 2 bps, depending on the structure and call tenor.  Although, during the past several weeks, we have seen yield spreads widen 1 to 3 basis points on 5-year callables (see chart below), which makes these structures relatively attractive versus shorter finals.

Agency redemptions were relatively light last week.  In aggregate, the Agencies called 33 issues totaling $938mm.

During the past week, we have observed continued demand for the following structures:


Michael S. Erhardt, CPA

Senior Vice President

Investment Strategist

Vining Sparks, IBG

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