Agency spreads unchanged; Freddie Mac, Farm Credit supply expected

By Lisa Kerner

Charlotte, N.C., Aug. 31 - Agency spreads "bounced around" from unchanged to wider by about 1 basis point on Monday, according to a trader who called the day "quiet."

While quiet was how Michael S. Effron, a trader with Jefferies & Co., Inc., described the primary market, he did note there were "a couple nice secondary trades."

"We don't have much supply," said Effron.

He is expecting Freddie Mac to reveal plans to sell a two- to five-year bullet at its next Reference Notes announcement, scheduled for Tuesday.

Effron believes Federal Farm Credit Banks Funding Corp. will add to the supply next week, while Federal Home Loan Banks remains quiet.

While Friday was also considered "quiet" by some, one trader called last week a crazy period during which spreads consolidated after three weeks of tightening.

Also on Friday, the New York Federal Reserve announced it bought $1.945 billion of Fannie Mae and Freddie Mac agency debt with maturities ranging from March 2016 to July 2032.

Dealers submitted $4.700 billion of agency debt for consideration, the Fed said, which was in line with at least one trader's expectations.

Since early December, the New York Fed has bought agency debt totaling $118.587 billion.

Fannie Mae added to last week's supply, pricing $1 billion of its 1.75% three-year Benchmark Notes due August 2012 on Wednesday at 99.791 to yield 1.823%. Some had expected Fannie Mae to pass on the offer or offer a two-year.

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