Agency spreads tighten as third quarter closes; New York Federal Reserve to buy on Thursday

By Lisa Kerner

Charlotte, N.C., Sept. 30 - Agency spreads moved in on Wednesday by 2 to 3 basis points across the curve, according to Michael Skinner, agency trader at Wall Street Access.

Skinner attributed the tightening in part to month-end/quarter-end buying as well as the New York Federal Reserve's announcement that it will buy agency coupon securities maturing between October 2013 and March 2016 on Thursday.

News that U.S. federal agency debt issuance was down 5% for the first nine months of 2009 compared to the prior-year period did not surprise Skinner.

"It was to be expected," said Skinner, noting the impact of the tumultuous housing market.

Callable spreads were described as "fairly steady" by one analyst, who said issuance was down from the last couple of days.

A mid-morning Treasury rally that "clipped some coupons" and the quarter end were partly to blame for the slump in issuance, said the analyst.

New supply from Fannie Mae is expected on Oct. 7.

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