The agency market has observed a light trading day but there are some interesting points to discuss.
One of my regular agency contacts (a trader at a small to medium firm) mentioned that he has seen inquiry and purchases by investors who normally do not play in the agency market. He said that he thinks that the new participants are seeking the safety and (perceived) liquidity of the agency market. From the vantage point of these investors, the agency market is a safe, liquid haven at generous spreads to Treasury yields. So my trader friend reports a modest influx of state and municipal buyers as well as money managers with new investment money.
Spreads today are mixed. Two year sector spreads are tighter by3 basis points to 5 basis points. Spreads in the 5 year sector are 3 basis points to 5 basis points wider and 10 year paper is unchanged,