Agency spreads tighten in response to Fed's buy back of agency debt

By Lisa Kerner

Charlotte, N.C., April 30 - Agency spreads in the five-year sector tightened "significantly", gaining 7 to 10 basis points on Thursday, said a source.

The source attributed the tightening to an announcement by the Federal Open Market Committee reiterating that the Federal Reserve would buy back up $200 billion of agency debt by the end of the year.

According to the source, the Fed has already bought between $60 billion and $70 billion worth of agency debt.

Spreads in the two-year sector were unchanged, the three-year sector moved in 1 to 2 bps and the 10-year sector tightened 4 to 5 bps, said the source.

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