June 4, 2018
Despite last week’s market volatility Agency yields ended the week near where they started, with most of the movement occurring on the short and long ends of the curve, leaving the belly largely unchanged. Two-year Agency bullet yields decreased 4 bps to 2.53%, 5-year bullet yields dipped 2 bps to 2.82%, and 10-year bullets decreased 4 bps to 3.19%.
Yield spreads for Agency bullets versus Treasuries were mostly unchanged, while spreads on Agency callables continued to widen. Spreads for callables widened 10 bps on the short end of the curve (3-year finals) and 4 to 6 bps for maturities of 5 years. As highlighted in the table below, callable spreads 3 years and out are all wider than their 12-month averages and at or near the highs for the year reached at the beginning of April.
The following table reflects last week’s total issuance and call activity across GSE issuers:
Fannie Mae skipped its benchmark note issuance slot on May 23 and has now passed six times this year. The Federal Home Loan Bank will announce on Tuesday, June 5th of any plans to sell Global Bonds and Freddie Mac has a Reference Note supply slot on Thursday, June 7th.
Senior Vice President