Agency Update

October 30, 2017

Agency yields rose for all maturities last week, led by the 10-year maturity range. The jump in rates more than offset the pullback from two weeks ago, and marked the sixth week in the last seven that yields rose. The primary impetus for last week’s rise in interest rates was tax and healthcare discussions in Washington, coupled with questions about the next Fed Chair and the ECB’s plans.  Two-year Agency yields increased by 1 bp to 1.66%, 5-year Agency yields climbed 1 bp to 2.09%, and yields on 10-year Agencies were higher by 3 bps to 2.76%.

Yield spreads for Agency bullets and callables compared to Treasuries were unchanged for the week. Compared to two weeks ago, spreads for bullets and callables contracted 2 to 12 bps with most of the tightening occurring in longer-term finals.  In the near-term, expect agency note spreads to remain in recent ranges.

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


Issuer Issued Called
Federal Farm Credit Banks      614,000,000
Federal Home Loan Banks   2,124,000,000                       40,000,000
Federal Home Loan Mortgage Corp      670,000,000                     150,000,000
Federal National Mortgage Association      382,000,000
Federal Agricultural Mortgage Corp
Total   3,790,000,000                     190,000,000


Last week, Freddie Mac forewent issuing reference notes on its October 25th announcement date.  There are no large agency bullet issues scheduled for announcement in the upcoming week.  Federal Home Loan Bank will have a global bond announcement on November 8th.

Relative value can still be found in the 2- and 3-year part of the curve as yields, for bullet and callable structures are at their 12-month highs.  During the past week, we have observed continued demand for the following:


Ricky Brillard, CPA


Vining Sparks, IBG

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