Agency Spreads

March 31st, 2009 3:08 pm | by John Jansen |

Agency spreads are unchanged to about 2 basis points wider in the 2year through 5 year sectors and unchanged to a basis point tighter in the 10 year sector.

Customer activity was light and the month end brought out some index buyers.

I reported earlier on the Federal Reserve buyback activity.

One participant noted today that sovereign and supra paper was very cheap to agency securities.

The European Investment Bank ( EIB) has a 5 1/8 2017 bond. (My apology for not getting the month.) It trades Libor + 125ish. One year ago it was a sub Libor issuer.

Central banks who own that paper and other similar names have been sellers as they raise capital to defend their currency or to replenish the capital in their banking system.

For someone in a narrowly defined portfolio it is probably worthwhile to cull through their holding of agency paper and FDIC paper and look into swapping into the supra sector.

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