Agency Update

May 14, 2018

Agency yields increased across the curve last week, moving in lock-step with the rise in Treasury yields.  Two-year Agency yields increased by 4 bps to 2.59%, 5-year Agency yields improved 5 bps to 2.92%, and yields on 10-year Agencies were higher by 2 bps to 3.27%.

Yield spreads for Agency bullets compared to Treasuries were unchanged, while yield spreads on callables to Treasuries were mixed.  Spreads for callable Agencies tightened 1 to 3 bps on the short end of the curve (2- and 3-year finals), but widened 1 to 7 bps on maturities of 10-years and greater.  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 averages.



For investors that can handle the optionality, certain callable structures with 10-year finals compare favorably to bullets because of the enhanced relative value on a yield spread basis (see graph below).



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


Last week, Federal Home Loan Bank passed on its global bond issuance slot. The highlights of the agency coupon calendar in the upcoming week will be Freddie Mac’s announcement tomorrow of any plans to sell reference notes and FHLB’s announcement on Thursday of any plans to sell global bonds.


Notable agency activity last week included:



Ricky Brillard, CPA


Vining Sparks, IBG

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
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120