Agency spreads tighten, but bullet spreads move out; Fannie Mae report paints gloomy picture

By Lisa Kerner

Charlotte, N.C., Aug. 22 - Agency spreads were mixed overnight and ended the day about 3 basis points tighter, a trader said.

Compared to last week's heavy buying, Monday's buying was light.

It seemed like "everybody in the world" was buying last week, said the trader.

People have cash and are chasing a flattened curve.

The two-year buyers are going out to the three-year sector, and the three-year buyers are going out to the four-year sector, according to the trader.

Bullet spreads were wider, said another trader.

The two-year sector was out 3 bps, the three-year and five-year sectors were both wider by about half of a basis point, and the seven-year sector was out by 2 bps to 3 bps.

Fannie Mae's economic and mortgage market analysis group on Monday released its August report detailing the movement of interest rates, the housing market, the mortgage market and the overall economic climate.

The group downgraded its outlook "substantially" for the remainder of 2011 and for 2012.

Economic growth for 2011 is expected to "downshift" to 1.4% from 3.1% in 2010 - nearly a full percentage point lower than the group's prior forecast. Growth is expected to pick up in 2012 but only to 2%, not the 3.1% projected by the group in July.

The downgrade "reflects a substantial risk of recession in coming quarters," the report said.

© 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.