Agency Update

May 15, 2017



Agency yields rose for most of the week and then reversed course on Friday with the release of weaker-than-expected core inflation data for April.  For the week, two-year Agency yields declined by 3 bps to 1.36%, 5-year Agency yields fell 4 bps to 1.95%, and yields on 10-year Agencies were lower by 3 bps to 2.70%.

Yield spreads for Agency bullets compared to Treasuries were stable last week, but Agency callables tightened 1 to 3 bps.  The tightening trend in Agency callables has been largely driven by downward movement in implied volatility in swap markets.  Fed Funds Contracts have moved in accordance with the greater likelihood of a June rate hike, while 3-month LIBOR has remained stable.  Heavy corporate bond issuance has also influenced yield spreads in the Agency sector.

For investors looking to harvest gains, consider selling Agency callables due to the increased level of demand in the secondary market.








Michael S. Erhardt, CPA

Senior Vice President

Investment 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