May 21, 2018
Agency yields increased 5 to 9 basis points last week, with larger movements occurring on longer maturities. On the week, two-year Agency yields increased 5 bps to 2.64%, 5-year Agency yields increased 5 bps to 2.97%, and yields on 10-year Agencies climbed by 10 bps to 3.37%.
Yield spreads for Agency bullets compared to Treasuries were unchanged with the exception of 2-year bullets, which experienced a widening of 4bps. Callable spreads on the short-end of the curve widened 2 bps, they widened 3 bps in the belly of the curve, and they were relatively stable on longer-term finals. Callable structures with 5-year finals compare favorably to bullets because of 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:
Freddie Mac passed on its reference note supply slot Tuesday and Federal Home Loan Bank priced a $3 billion 2-year global bond due on May 28, 2020 on Thursday. The highlight of the agency coupon calendar in the upcoming week will be Fannie Mae’s announcement on Wednesday of any plans to sell benchmark notes.
Notable agency activity last week included:
Ricky Brillard, CPA
Vining Sparks, IBG