Agency spreads end week generally unchanged; Middle East instability still a concern

By Lisa Kerner

Charlotte, N.C., March 11 - Agency spreads were unchanged on Friday, as they have been for most of the week, according to a trader.

Spreads, which have been holding well, could go wider at the start of the March 14 week, depending on what happens over the weekend, he said.

Swaps ended the day about 2 basis points wider.

Callables have been quiet for the last three or four days. "We reduced most of our position," said the trader.

Activity benefited from the fact that "no one wants to go home short on the weekend."

Friday was "a little weird," the trader noted, with news of the earthquake and tsunami in Japan. He did not expect the event to have a major impact on the U.S. market.

A larger concern, said the trader, continues to be the political turmoil in the Middle East.

New agency supply is expected in the week ahead when Federal Home Loan Banks has calendar slot on Wednesday to announce a Global Note offering.

FHLB could announce a new three-year Global, but the trader thinks it will reopen its two-year paper.

On Feb. 16, FHLB priced $3 billion of 1% two-year Global Notes at a spread of 16.5 basis points over Treasuries. The notes were sold at 99.958 to yield 1.02%.

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