September 10, 2018
The Treasury market sold off last week, particularly after the strong jobs report on Friday, and Treasury yields ended the week approximately 8 basis points higher for maturities of 2 to 10 years. Agency bullet yields moved in lockstep with Treasuries. Yields for 2-year bullets are trading at 2.77%, 3-year bullet yields increased to 2.84%, and 5-year bullets now yield 2.90%.
Yield spreads for Agency bullets compared to Treasures were unchanged, while callable spreads tightened for a second consecutive week. Spreads for callable Agencies tightened 2 to 3 bps for 2- to 10-year finals regardless of tenor. Callable agencies in general increased approximately 5 basis points across the curve. Less-structured 3-year callables increased to 3.05%, and similarly structured 5-year callables are now trading at 3.35%. As seen in the chart below, bullet and callable yields for 3- and 5-year agency product remain at or near the highs of the past several years.
The following table reflects last week’s total issuance and call activity across GSE issuers:
Last Wednesday, September 5th, the Federal Home Loan Bank announced issuance of 2-year Global securities priced at +8 basis points. It last priced a $3 billion 2-year note on May 18th at +9 to Treasuries. This week Fannie Mae will announce on September 11th any plans to issue Benchmark securities, and Freddie Mac has an issuance slot on September 13th. The Federal Home Loan Bank’s next issuance date is September 20th.
Senior Vice President