Spreads widen 2-3 bps; Fannie Mae prices $3 billion Benchmark Notes at 17 bps over Treasuries

By Lisa Kerner

Charlotte, N.C., June 15 - Agency spreads ended the day wider by 2 basis points to 3 bps overall and 3.5 bps on the five-year sector, according to a trader, who called Wednesday "messy."

Agencies didn't track swaps, which was a good thing, the trader said, because swap spreads "blew out" 3 bps to 4 bps. He expected agencies to see some buyers as a result.

Fannie Mae did not take a pass, as some expected, and instead priced a $3 billion two-year Benchmark Note on Wednesday at a spread of 17 bps over Treasuries.

The notes were sold at 99.83 to yield 0.58%.

Price talk initially was at a spread of 15 bps over Treasuries and rose to 17 bps over Treasuries.

The trader, who expected a spread of 16.5 bps, said the note closed at 17.5 bps bid, most likely with its book intact. The note was a strong performer against Libor.

There was "a huge bid on the break," said the trader. "People were shorting, not flippers."

By region, the Benchmark Note sold mainly in the United States (85.9%), followed by Asia (6.4%), other regions (6.3%) and Europe (1.4%).

Fund managers led the way for investors (73.3%), followed by state/local governments (11.1%) and central banks (10.9%). Rounding the list were insurance companies (4.3%) and commercial banks (0.4%).

Fannie Mae's next Benchmark Note announcement is on the calendar for July 13.

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