Midafternoon Delights

February 6th, 2009 3:59 pm | by John Jansen |

Agency spreads are tighter by 5 basis points in the 2 year and three year sector and by 8 basis points in the 5 year sector. Ten year spreads have narrowed by about 13 basis points. The market is rife with rumors of potential guarantees of all sorts of assets by the government and that has created a rather salutary space for spread product. There is another rumor (which if I had been a pure journalist I would have placed first) which holds that the Obama Administration is giving serious consideration to placing FNMA and Freddie Mac on balance sheet. That would make their debt ‘pari passu” with Treasury paper.

 

I have heard of only scattered buying but given the extent of the move it is likely that there was some going away buying.

 

Swap spreads have tightened on the back of the stories about guarantees of interbank lending by the government and after being wider when I wrote of them this morning they are all tighter on the day. The 2 year spread is now 5 basis points tighter on the day at 61. The 5 year spread has narrowed 2 ¼ basis points to 63, Ten year spreads are in 1 ¾ basis points to 22 ¾. Thirty year spreads are ¼ basis point tighter at NEGATIVE 23 ¾.

 

Mortgages are about 1 tick tighter to swaps.

 

The main topic in MBS land is slow speeds as those who wish to refinance are unable to find money. Against that background, 6 percent and 6 ½ percent coupons outperformed the rest of the stack.

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