May 22, 2017
Agency yields were driven lower last week by a global flight to quality. For the week, two-year Agency yields declined by 1 bp to 1.35%, 5-year Agency yields fell 7 bps to 1.88%, and yields on 10-year Agencies were lower by 9 bps to 2.61%.
Yield spreads for Agency bullets compared to Treasuries held firm, while Agency callables generally widened 2 to 6 bps, a reversal of the recent tightening trend.
We observed an increase in redemption activity last week, with the Agencies calling 45 issues totaling $2.75bn. For investors looking for reinvestment options, consider FHLMC paper since it continues to offer modestly higher yields (1 to 3 bps) compared to the other GSEs.
Michael S. Erhardt, CPA
Senior Vice President
Vining Sparks, IBG