June 18, 2018
The curve flattened on the week with Agency yields moving higher on the front end of the curve, particularly for maturities of 2-3 years, and declining for maturities of 10 years and longer. Three-year Agency bullet yields increased 4 bps to 2.75%, 5-year bullet yields increased 1 bp to 2.88%, and 10-year bullets declined 3 bps to end the week at 3.22%.
Yield spreads for Agency bullets versus Treasuries were unchanged across the curve, while spreads on Agency callables widened for maturities of 5 years and longer. Spreads for callables were unchanged for 3-year maturities and widened by 2 bps for maturities of 5, 10, and 15 years. The biggest move in callables was for maturities of 5 years with a 2-year lockout, which cheapened by 7 bps versus a week ago and are at the widest levels in more than a year. Regardless of structure or term, callable yields are near the highs over the past 12 months and callable spreads for maturities 5 years and out are at or near the highs for the year.
The following table reflects last week’s total issuance and call activity across GSE issuers:
Fannie Mae passed on its Benchmark issuance slot on June 14th, marking the 7th time out of its 9 issuance dates it has skipped this year after passing on 13 of 18 dates in 2017. This Tuesday, June 19th, marks the next slot for Freddie Mac to issue Reference Notes. On Thursday June 21th Fannie Mae will announce any plans to issue Benchmark Notes.
Senior Vice President