Agency curve widens on uncertainty; Freddie Mac sells $4.5 billion Reference Notes at talk

By Lisa Kerner

Charlotte, N.C., Oct. 5 - Agency spreads ended Wednesday 3 basis points to 4 bps wider across the curve on continued uncertainty surrounding the European financial market, according to Mary Ann Hurley, vice president of fixed-income trading for D.A. Davidson & Co.

And while stocks were up, Hurley said it is only "by a fraction of what they've given up."

Looking ahead, Hurley said the release of September unemployment figures on Friday morning will "set the tone for the day."

Initial jobless claims will be released on Thursday.

Hurley said uncertainty, which seemed to be the theme all summer, is carrying over into fall, with more talk than action when it comes to a solution to Europe's economic crisis. The trader is not hopeful for a near-term solution.

As Greece heads toward default, there is concern that other "Club Med countries" including Italy and Spain, will fall in a domino effect, said Hurley.

While the European populace seems unwilling to bail out the euro zone, any rescue plan will need to identify who is going to contribute and how much.

Germany seems to be in the best shape, she said.

Also on Wednesday, Freddie Mac priced $4.5 billion of new 0.75% three-year Reference Notes on Wednesday at a spread of 34.5 basis points over Treasuries.

The notes were sold at 99.966 to yield 0.761%.

Price talk was at a spread of 34.5 bps over Treasuries.

Hurley said the issue was selling well.

Barclays Capital Inc., Citigroup Global Markets Inc. and UBS Investment Bank were the lead managers.

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