Agency spreads widen slightly; little reaction to resignation of Freddie Mac CEO; FHLB expected

By Lisa Kerner

Charlotte, N.C., March 3 - Agency spreads were slightly wider on Monday, but "not dramatically so," said a source.

The three- and 10-year sectors fared the worst, moving out by 6 basis points and 7 bps respectively on a "slow flow day," according to the source.

The five-year sector was weaker by 3 bps while the two-year sector saw "a couple [basis] point" widening.

Monday's weakening - against an overall negative backdrop across the financial markets - came after spreads held steady last week despite the influx of $15 billion of three-year Benchmark Notes from Fannie Mae, said a source. The sale was the biggest offering ever under the agency's Benchmark Notes program.

Looking ahead, one source said there is "supply coming," with the Federal Home Loan Banks expected to announce a new global bond offering on Tuesday, likely with a three-year maturity.

Meanwhile Freddie Mac's announcement Monday that its chief executive officer David Moffett would step down by March 13 seemed to go almost unnoticed as far as trading levels were concerned.

"The bigger news will be who will replace him," said one source, referring to Moffett's role as CEO as "daunting."

Another market source said "no one is there to blame" Moffett, who's held the job for only a few months.

Moffett said he wants to return to a role in the financial services sector, according to a Freddie Mac statement.

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