New Freddie Mac five-years steady as swaps hold firm; early bid on New York Fed buybacks

By Kenneth Lim

Boston, June 19 - Agency spreads held on Friday after widening the day before to echo swaps for the second day, a trader said.

Agencies had recently been "kind of independent" of swaps, but the last two days began to follow the interest rate derivatives again, trader Craig Ziegler at Broadpoint told Prospect News.

"Swaps were wider towards yesterday [Thursday]," Ziegler added. "You saw the widening in agencies yesterday about lunchtime, came in a little near the close. Today they hovered around."

Freddie Mac's new five-year 3% Reference Notes held firm at a spread of 45 basis points bid, 46 bps offered over Treasuries. The agency priced the $3 billion offering on June 17 at a spread of 41.3 bps over Treasuries.

The secondary market in general had a "rather dull day" on Friday, Ziegler said. Bids were slightly better early in the day, however, on buybacks of paper due 2010 and 2011. The Federal Reserve Bank of New York on Friday repurchased about $4.789 billion of agency paper due 2010 and 2011 early in the session, according to a New York Fed press release.

The coming week could come under early pressure with Fannie Mae possibly raising two- or three-year paper, Ziegler said.

"Besides that, it really depends upon how the markets react away from agencies," he said.

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