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Agency spreads widen 1 to 2 bps; Fannie Mae announces two-year Benchmark Notes; callables up
By Lisa Kerner
Charlotte, N.C., June 14 - Agency spreads ended Tuesday 1 basis point to 2 bps wider, according to Mike Skinner, an agency trader with Wall Street Access, who attributed the widening in part to positive stock market performance.
The two-year sector widened 1 bp to 1.5 bps, said another trader, due in part to Fannie Mae's Tuesday announcement that it will add to supply with a two-year Benchmark Note due Aug. 9, 2013.
Skinner said talk had the note priced at 15 bps over Treasuries. And while he does not see it as a big seller or a "screaming bargain," he expects it will still go pretty well.
There was no word on the size. Monday, at least one trader predicted that Fannie Mae would issue $3 billion to $4 billion.
The note will settle on Friday. Issue size and coupon are to be determined, according to the agency.
Barclays Capital Inc., Credit Suisse Securities (USA) LLC and UBS Securities LLC are the joint lead managers.
Co-managers include Blaylock Robert Van, LLC, BNP Paribas Securities Corp., Deutsche Bank Securities Inc., FTN Financial Capital Markets, Goldman Sachs & Co. and Williams Capital Group LP.
Bullets down, callables up
Along with news of Fannie Mae's supply, the trader said as the end of the quarter approaches, he's had to scale back inventory.
While the market keeps selling off, the trader can't find a pattern to a slow and spotty performance.
"Hopefully rates keep churning higher," he said.
He has seen a "huge" drop off in bullets due to rates. "People are waiting to buy dips, but we did not see those dip buyers coming in today," said the trader, noting that may have been due in part to the Fannie Mae announcement.
"Most of our deals were in callables," he said.
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