Agencies widen; long end feels impact of Operation Twist; Freddie Mac announcement eyed

By Lisa Kerner

Charlotte, N.C., Oct. 3 - Agency spreads ended the day wider on Monday by about 2 to 3 basis points on low volume, according to a trader.

The shorter end of the curve was also 2 to 3 bps wider, said another source, while the 30-year sector moved out about 5 to 7 bps on the first day of the Fed's so-called Operation Twist.

"Everything else got crushed," said the source, as the Fed bought back $2.5 billion of Treasuries.

There was "significant rallying" in the long end, the trader said. He also commented on Treasuries' overshadowing agencies on Monday.

Operation Twist, announced by the U.S. Federal Reserve's Open Market Committee on Sept. 21, is the Fed's plan to buy long and sell short.

As previously reported, by the end of June 2012 the Fed will purchase $400 billion of Treasury securities with remaining maturities of six years to 30 years. It will sell an equal amount of Treasury securities with remaining maturities of three years or less.

Over the next six months, the proceeds from agency maturities and agency mortgaged-backed securities, or about $73 billion, will be reinvested into the mortgage-backed markets.

The Fed will make the schedule of sales and purchases available by the end of each month.

Separately, Freddie Mac could add to supply as the agency is on the calendar to announce a potential Reference Note offering on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.