Agency spreads unusually wide in the 20-year; Fannie Mae adds to supply with Benchmark Note

By Lisa Kerner

Charlotte, N.C., Sept. 22 - Agency spreads were unusually wider in the 20-year sector, out 11 basis points to 15 bps, according to a trader on Thursday.

Agencies were underperforming swaps on the day, with the 30-year swap lower than 30-year Treasuries, the trader said.

With the market more or less in crisis mode, swap spreads are doing the opposite of what is expected.

The trader saw throwaway bids in the 20-year sector.

"Seller are not motivated by spread, they are motivated by it sitting on 3%," said the trader.

"Guys are trying to get out of paper," he said.

"Agencies were hit pretty hard," said another trader about Thursday, which he described as "pretty ugly."

Fannie Mae added to supply on Thursday, announcing a new Benchmark Note due Oct. 30, 2014.

The issue was "priced to clear" said one trader.

Price talk in the morning was a spread of 26½ bps, which was expected to widen on an expected size of $3 billion.

BNP Paribas Securities Corp., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are the joint lead managers. The co-managers include CastleOak Securities, LP, Deutsche Bank Securities Inc., FTN Financial Capital Markets, UBS Securities LLC and Williams Capital Group LP, Fannie Mae said.

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