Agency Update

March 19, 2018



The curve flattened on the week with yields on Agencies moving higher on the short-end and belly of the curve, and declining for maturities 10 years and longer.  Curve flattening was the dominant theme in the Treasury market.  The front-end lagged throughout the week as market participants contended with heavy front-end supply and positioning ahead of this week’s expected FOMC rate hike.  Two-year Agency yields moved higher by 8 bps to 2.38%, the 5-year Agency yield increased 2 bps to 2.75%, and the yield on the 10-year Agency fell 4 bps to 3.15%.

Yield spreads for Agency bullets compared to Treasuries widened by 2 to 4 bps, while yield spreads on callables to Treasuries were mixed.  Callable spreads on the short-end of the curve tightened 1 to 3 bps, they were relatively stable in the belly of the curve, and they widened 5 bps on longer-term finals.  As seen below, Agency callables with 10-year finals remain appealing from a relative value perspective as current spreads compare favorably to their 12-month highs.

 

 

 

 

The following table reflects last week’s total issuance and call activity across GSE issuers:

 

The rising trend in interest rates has certainly decreased call activity in the last month.

Last week, most dealers were expecting FHLB to pass on its issuance slot, but they surprised the markets by launching its new $3 billion two-year global bonds due March 30, 2020.  The highlight of the agency large bullet calendar in the week ahead will be Fannie Mae’s announcement on Thursday of any plans to sell benchmark notes.  Fannie Mae has passed its last two supply slots.

Notable agency activity last week included:

 

 










Ricky Brillard, CPA

Strategist

Vining Sparks, IBG

INTENDED FOR INSTITUTIONAL INVESTORS ONLY.
The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
Member FINRA/SIPC
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120