Agency spreads mixed, Fannie Mae prices $5 billion Benchmark Notes

By Lisa Kerner

Charlotte, N.C., May 13 - Agency spreads proved to be a "mixed bag" on Wednesday, according to one trader, with a little tightening in the front end of the yield curve.

Fannie Mae priced $5 billion of five-year Benchmark Notes at 56 basis points over Treasuries.

The notes quickly tightened to 52.5 bps before subsequently giving up some of those gains but still ending the day better than their pricing level at 54.5 bps bid, the trader said.

While it was heard the issue had a strong book of $10 billion, the trader didn't seem to think the trade went especially well, calling it simply "OK."

Several other five-year deals were also announced on Wednesday, which may have moved some people away from the Fannie Mae deal, the trader said.

Overall, "agencies couldn't keep up with swaps," said the trader.

Fannie Mae priced the 2.5% notes, which mature on May 15, 2014, at 99.855 to yield 2.531%. The Benchmark Notes sold primarily in the United States, which took down 74.7% of the total, according to Fannie Mae.

Other regions were Asia, which accounted for 10.7%, followed by Europe at 7.7%, the agency said.

Fund managers lead the way among investors, taking 51.4% of the total, followed by commercial banks at 19.4% and central banks at 16.6%, according to Fannie Mae.

Barclays Capital Inc., Deutsche Bank Securities Inc., and J.P. Morgan & Co. acted as joint lead managers for the offer. The co-managers include Blaylock Robert Van, LLC, FTN Financial Capital Markets, Morgan Stanley & Co., and UBS Securities LLC.

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