Agency spreads tread water as swaps widen on eased Greek fears; Fannie Mae announcement ahead

By Kenneth Lim

Boston, April 9 - Agency spreads closed unchanged to slightly wider on Friday as a let-up in concerns about Greece pushed swaps outwards.

Bullet spreads mostly held in place for a second day as the market wound down for the weekend.

"Spreads are pretty much unchanged, maybe wider by 1 to 1.5 basis points in the five-year sector," an agency trader said. "10-years are about a basis point wider."

Callables had a better day, with issuance continuing at a strong pace.

"It's been a pretty active day for callables," the trader said. "We had about 40 deals that have hit the tape today."

Volatile week

Spreads were mostly tighter on the week, which saw a sharp narrowing of swaps on Tuesday pull agencies closer to Treasuries.

"It's been a pretty volatile week," the trader said. "We saw spreads pretty steady at the beginning of the week, then we saw the tightening in swaps with the news on Greece that brought agencies in with it."

Yields on Greek government bonds rose earlier in the week on fears that the debt-laden country would face problems raising more money to service existing obligations. But those fears eased slightly on Friday amid speculation of an aid plan from other European countries.

"On Greece, the news has trickled a little bit more positive, so spreads are moving back out," the trader said.

Fannie Mae in pipeline

The coming week will see Fannie Mae potentially launching a benchmark-sized deal on its April 14 calendar slot. The trader said an offering at the shorter end of the curve was the most probable.

"I think twos to threes are probably likely based on their curve," the trader said. "Their current on-the-runs are their November '14s. The market would like to see a five-year, but based on the Libor curve I think a two- or three-year is more likely."

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