Agency spreads mixed, tighten on low volume ahead of quarter end; KfW sells $3 billion

By Lisa Kerner

Charlotte, N.C., Sept. 27 - Agency spreads were mixed on Tuesday, according to a trader, who described the day as "very quiet."

The seven-year bucket was 0.5 basis point to 1 bp tighter, while two-year paper was unchanged.

The three-, five- and 10-year sectors were 1 bp tighter, the trader said.

"The theme in our space continues to be heavy redemption and reinvestment of proceeds in callables," he said.

A second trader also lamented that Tuesday was slow, with trade volume of bullets average. He attributed the inactivity in part to quarter end.

"There was a pretty good move back on Operation Twist," he said of the Fed's plan announced last week to buy long maturities and sell short-dated paper.

Operation Twist caused a readjustment, or a flattening, of the curve that had been priced in, he said.

"Now you've got pull back," said the trader.

"Some buyers have come to put some money in, but no one is real motivated," he added.

With a rally in rates, there has been "a flood of demand for discount note demand type instruments," the trader said.

In the primary market, Germany's KfW sold $3 billion of 1.25% five-year notes.

The Frankfurt-based state-owned development bank priced the non-callable notes due Oct. 5, 2016 at 99.624.

Bookrunners were Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and RBC Capital Markets Corp.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.