Agency spreads tighten in 10-year notes; debt issuance huge Monday on investor demand

By Lisa Kerner

Charlotte, N.C., May 17 - Monday was a "huge issuance day" for agency debt, according to Michael Gladden, vice president of investment strategy at Mischler Financial Group.

Gladden said there were about 40 issuances of debt on Monday, compared to about 15 to 20 on Thursday and Friday.

He attributed the activity to investor demand.

Debt was still being issued late in the day Monday that included short-term calls and step-up features, said Gladden.

Some deals were upsized as many as three times, including one five-year that rose to $135 million.

It was not the day Gladden expected. He said Monday morning started quietly, with activity picking up midday, possibly due to a drop in the stock market.

"It seems like there was a lot of buying today," Gladden said.

On Tuesday, Fannie Mae is expected to announce an offering of Benchmark Notes that Gladden expects to be in the two-year to five-year range "where the appetite is."

Gladden is expecting good demand for the Fannie Mae issue if it comes within that range of maturities.

Gleecher Securities trader Craig Ziegler expects Fannie Mae to come out in the two- to three-year range.

Ziegler saw some profit taking in agencies at the end of the day but said he did not see anything "grandiose" on Monday.

The front end of agency spreads was tighter by 2 basis points, with the 10-year tighter by 2 to 2.5 bps as agencies "come back" from Friday, Ziegler said.

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