Agency spreads tighten about 1 bps, agencies outperform swaps on a slow day

By Lisa Kerner

Charlotte, N.C., Sept. 27 - Agency spreads were about ½ to 1 basis point tighter versus Treasuries and agencies outperformed swaps, a trader said on Monday.

A rally in Treasuries "took the wind out of the sail" of buying on the day, while the approaching quarter end created some artificial price movement.

The trader also noted there is "still a lot more cash chasing paper."

Another market source found most agency activity to be in the two- to three-year sectors, with the back end unchanged.

The flattening curve of the Treasury market was not reflected in agencies, according to the source.

Monday proved to be rather non-eventful for one trader, who said there wasn't much to talk about.

He said agencies are staying pretty tight to Treasuries until there is news about the future of Fannie Mae and Freddie Mac.

Bullet spreads were ½ bps tighter to the five-year and wider in the longer end.

There were two big deals in callables on Monday, one trader said, a $1 billion Fannie Mae three-year non-call one year and a $500 million Federal Home Loan Bank five-year non-call one month.

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