Agency spreads stable; Fannie Mae prices $5 billion three-year Benchmark Notes at spread talk

By Lisa Kerner

Charlotte, N.C., Jan. 28 - Agency spreads remained stable on Friday, or "pretty much status quo," according to a trader.

The trader noted some better buying in the two-year sector, with the three-year sector widening due to the new Fannie Mae Benchmark Notes that priced on Friday.

Agencies followed swap spreads. The two-year sector beat out swap spreads "pretty handily," the trader said.

The Fannie Mae book was "pretty decent," said the trader, who noted new supply is expected next week from Freddie Mac on Tuesday.

Another source said at the end of the day on Friday that the Fannie Mae deal was locked at 26.5 basis points, the same as spread talk on Thursday.

He saw 10-year agency spreads tighter on the day and the seven-year sector 3 bps tighter. The overall curve was unchanged.

Fannie Mae prices issue

Fannie Mae priced $5 billion of 1.25% three-year Benchmark Notes on Friday at a spread of 26.5 bps over Treasuries.

The notes were sold at 99.955 to yield 1.265%.

According to Fannie Mae, the largest percentage of the notes, 54.4%, was sold in the United States, followed by Asia at 22.5% and other regions at 22.3%.

Central banks led the way for investors with 44.1%, followed by fund managers at 42.8%, commercial banks at 7% and insurance companies at 3%.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co. were the lead managers.

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