Agency spreads were a little tighter today joining swap spreads at narrower levels. There were sellers of bullets with maturities of less than a year and discount notes. Another dealer reported customer demand for cushion bonds(callable bonds 200 basis points or so in the money on which the call in three months to six months is a virtual certainty).
Additionally,since this was month end dealers reported some index related buying.
Freddie Mac is scheduled to make a supply announcement tomorrow.Conventional wisdom holds that the entity will offer $4billion 3 year notes. The last offering by Freddie was 2 year and 5 year paper. The 5 year piece went poorly and it is unlikely they will wish to sell more 2 year paper. So the 3 year bucket wins by default.