Agency spreads widen on the day; Fannie Mae announcement ahead; step-ups gaining popularity

By Lisa Kerner

Charlotte, N.C., Aug. 23 - Agency spreads ended Monday a bit wider with the two-year and 10-year sectors out by 1 to 2 basis points, according to a trader.

The trader described agencies in general as being "a little soft around the day," with spreads tight relative to swaps.

Fannie Mae could add to supply this week, with an announcement scheduled for Thursday that could end up being a non-event.

Because the agency did $7 billion earlier in the month, Fannie Mae's announcement could simply be that it is skipping a new issue or possibly upsizing by $1 billion, the trader said.

The trader noted that step-ups seem to be increasingly popular. People like them, he said, because they offer protection and typically provide added yield.

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