May 29, 2018
A flight to quality amid ongoing political uncertainties in Europe sent Agency yields lower across the curve, with the most movement occurring in longer-term maturities (5+ years). Two-year Agency yields decreased by 7 bps to 2.57%, 5-year Agency yields fell 12 bps to 2.85%, and yields on 10-year Agencies were lower by 13 bps to 3.23%.
Yield spreads for Agency bullets compared to Treasuries were unchanged, while spreads on Agency callables widened, depending on the structure and call tenor. Spreads for callable Agencies widened 1 bp on the short end of the curve (3-year finals) and 1 to 3 bps on maturities of 5 years and greater. As seen below, Agency callables with 10- and 15-year finals remain appealing from a relative value perspective as current spreads compare favorably to their 12-month averages.
The following table reflects last week’s total issuance and call activity across GSE issuers:
Fannie Mae skipped its benchmark note issuance slot last week and has now passed six times year-to-date. There are no large agency bullet issues scheduled for announcement in the upcoming week. FHLB will announce on Tuesday, June 5th of any plans to sell global bonds and Freddie Mac has a reference note supply slot on Thursday, June 7th.
Notable agency activity last week included:
Ricky Brillard, CPA
Vining Sparks, IBG