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Agency spreads widen, Fannie Mae impacts five-year sector
By Lisa Kerner
Charlotte, N.C., March 16 - Agency spreads moved out on Monday, with the short end underperforming by 3 to 4 basis points, according to one trader.
The five-year sector was out 2 bps, impacted by last week's issue by Fannie Mae of $9 billion five-year Benchmark Notes, the trader said.
Initially, the issue went well, said the trader, coming out at 90 bps - slightly better than talk of the 91 bps area - and then tightening to 88 bps. But by Monday's close, the new notes had widened out to around to 93 or 94 bps.
Meanwhile Federal Reserve officials will begin a two-day meeting on Tuesday to discuss the economic outlook, which made for a slow day Monday for one source.
The slow down is typical ahead of the Fed meetings, said the source.
While the source expects the Fed's statement to stay the same, he'd like to hear that "growth is on the horizon" or words to that effect.
The source attributed last week's influx of FDIC-guaranteed paper to rumored fee increases, noting bond sales by Goldman Sachs, Bank of America and GE Capital under the Temporary Liquidity Guarantee Program.
Last week, FDIC-backed issues included Goldman Sachs Group Inc., which sold sold $1 billion FDIC-guaranteed notes due 2011 and Union Bank, NA, which sold $500 million FDIC-guaranteed notes due 2012. GE Capital Corp. sold $1 billion FDIC-guaranteed notes due 2012, while Morgan Stanley sold $2 billion 2.250% FDIC-guaranteed notes due 2012.
News reports have said the Fed plans to add a fee of 25 basis points on banks and 50 basis points on bank-holding companies. Currently under the TLG Program, the Fed charges one percentage point of the amount sold on debt maturing in one year.
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