Agency spreads tighten 2 to 3 bps; FHLB step up deals a reaction to curve

By Lisa Kerner

Charlotte, N.C., June 4 - Agency spreads were slightly tighter on Thursday "by 2 to 3 basis points on the bullets," according to a trader.

Callables were wider by 2 to 3 bps, the trader said. He noted that the 10-year Treasury note "caught close" to a support level of 3.375%.

The trader didn't see much significance in the large number of small callable deals with step-up coupons announced recently by the Federal Home Loan Banks but did note the popularity of the structure is probably in reaction to a steeper yield curve.

Because people aren't sure where interest rates are headed, step ups serve as a hedge for investors, said the trader.

Investors are also waiting for non-farm and unemployment numbers to be announced on Friday, according to the trader.

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