June 5, 2017
Agency yields drifted lower this past week, with most of the movement coming on Friday with the release of the May employment report. On the week, two-year Agency yields fell 3 bps to 1.35%, 5-year Agency yields decreased 8 bps to 1.81%, and yields on 10-year Agencies declined by 10 bps to 2.52%.
Yield spreads for Agency bullets compared to Treasuries were unchanged, while Agency callables widened 1 to 8 bps, depending on the structure and call tenor. The larger movements occurred on structures with 10- to 15-year finals.
Last week investors were focused on the following:
- Selling Agency bullets with 1 to 2-year finals (taking advantage of the market rally)
- Adding callables with 5- to 6-year finals and 1-year of lockout
Michael S. Erhardt, CPA
Senior Vice President
Vining Sparks, IBG