Agencies end the week slightly tighter; Fear subsides over European financial crisis

By Lisa Kerner

Charlotte, N.C., Oct. 7 - Agency spreads ended the day, and the week, tighter by 1 basis point, according to a market source.

There was strong movement with the five-year bucket leading the way, said another trader, who also agreed spreads had come in.

The trader said there were more buyers than sellers on the day, by about a 2 to 1 margin.

The near-panic caused by Europe's financial situation seems to have calmed as talk switched to 'what will be done?' from 'when will something be done?'" he said, noting that "cooler heads will prevail."

European Union leaders are expected to meet over the weekend to discuss the possibility of bank recapitalizations.

Any more good news that comes out of Europe will be positive for agencies, said the trader.

"People are coming back to agencies, and we feel like we are in good shape," he said.

According to the trader, when Treasuries sell off, like they did on Friday, it implies investors feel they can safely be in other things, like agencies.

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