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Agency spreads widen on the day but remain narrow; new supply in sight from FHLB
By Lisa Kerner
Charlotte, N.C., March 30 - Agency spreads remained narrow, as they have been for the past couple of weeks, according to a source on Tuesday.
Callables were expensive to bullets for two years and shorter, the source said.
"Everyone is looking for that extra bit of yield," said the source, and customers are seeing if they can pick up an extra basis point or two.
Agency spreads felt some pressure on the day due to activity level, according to a trader.
He said agency spreads widened on Tuesday, with the short end out by half of a basis point to 1 bp, the five-year sector moving out by "a couple" bps and the 10-year widening by 2 bps to 3 bps.
The trader noted the week was a little slow due to what he called the "holiday situation," the month-end and the fact that people often don't want to own agencies on the 31st day of the month.
Looking ahead, the trader said supply is expected next Tuesday from Federal Home Loan Banks.
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