Fannie Mae mortgage-bond spreads fall to record
Wednesday, 10 March 2010
NEW YORK, Mar 9 (Bloomberg): Yields on Fannie Mae and Freddie Mac mortgage securities that guide US home-loan rates fell to the lowest relative to Treasuries on record, even as the scheduled end of Federal Reserve purchases approaches.
The difference between yields on Washington-based Fannie Mae's current-coupon 30-year fixed-rate mortgage bonds and 10-year Treasuries narrowed 0.02 percentage point yesterday to about 0.63 percentage point to match the smallest spread since at least 1984, according to data.
Spreads on agency mortgage bonds have held near lows while the unprecedented Fed programme, in which the central bank is buying $1.25 trillion of the debt, nears its March 31 conclusion.
Some investors consider the debt more attractive at tighter nominal spreads because of declines in expectations for interest-rate volatility, affecting how certain they can be about how long it will remain outstanding, according to JPMorgan Chase & Co.
"While we aren't at a point where mortgages look cheap, they're nowhere as rich as they were," JPMorgan analysts led by Matt Jozoff in New York wrote in a March 5 report.
Spreads for the Fannie Mae securities on a so-called option-adjusted basis, which takes into account prepayment uncertainty, against interest-rate swaps have widened to negative 0.03 percentage point from as low as negative 0.22 percentage point on Dec 21, according to data.
Elsewhere in credit markets, at least $12.3 billion of US corporate bonds were marketed yesterday, the most since Feb. 4, when volume reached $18.85 billion, data show. DirecTV, the El Segundo, California-based satellite-television provider, sold $3 billion of 5-, 10- and 30-year notes.
Bank of America Corp, the largest US bank by assets, sold $2.5 billion of five-year notes.
The extra yield investors demand to own corporate bonds rather than government debt fell 1 basis point to 162 basis points, the lowest since Jan 21, according to Bank of America Merrill Lynch's Global Broad Market Corporate index. Average yields were 4.05 per cent, the index shows.
In Iran, Pars Oil & Gas Co issued $1 billion of euro-denominated bonds to help boost the development of its South Pars gas field, Press TV reported. The National Iranian Oil Co, POGC's parent, has guaranteed a return of as much as 8 per cent on the debt, the state-run news channel said.
Bombardier Inc, the world's third-largest commercial airplane maker, withdrew a proposed placement of senior notes citing "unfavourable conditions in the debt capital markets." Montreal-based Bombardier delayed a $1 billion sale of junk bonds after investors demanded a higher yield than the company had expected, people familiar with the matter said last month.
Krung Thai Bank Pcl, Thailand's second-biggest lender by assets, plans to sell as much as 10.4 billion baht ($318 million) of bonds to repay debt, its President Apisak Tantivorawong told reporters today in Bangkok.
PT Astra Sedaya Finance, a unit of Indonesia's largest automobile distributor, said it plans to sell 1.5 trillion rupiah ($163 million) of bonds to boost its ability to lend to consumers for vehicle purchases.
In the US, the cost of protecting against corporate defaults fell for a second day. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, declined 2.8 basis points to 82.5 basis points, according to CMA DataVision, the lowest since Jan 14.
The Markit iTraxx Japan index increased 1 basis point to 123 in Tokyo today, Morgan Stanley prices show. The Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings increased 1 basis point to 72.25, JPMorgan prices show.
Credit-swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years.
Swaps contracts to protect against default on Greek government debt declined 1 basis point to 279, the lowest since Jan 12, according to CMA prices at 9 am in London. Greece sold 5 billion euros ($6.8 billion) of notes last week and passed 4.8 billion euros of spending cuts, reducing the risk of default.
The difference between yields on Washington-based Fannie Mae's current-coupon 30-year fixed-rate mortgage bonds and 10-year Treasuries narrowed 0.02 percentage point yesterday to about 0.63 percentage point to match the smallest spread since at least 1984, according to data.
Spreads on agency mortgage bonds have held near lows while the unprecedented Fed programme, in which the central bank is buying $1.25 trillion of the debt, nears its March 31 conclusion.
Some investors consider the debt more attractive at tighter nominal spreads because of declines in expectations for interest-rate volatility, affecting how certain they can be about how long it will remain outstanding, according to JPMorgan Chase & Co.
"While we aren't at a point where mortgages look cheap, they're nowhere as rich as they were," JPMorgan analysts led by Matt Jozoff in New York wrote in a March 5 report.
Spreads for the Fannie Mae securities on a so-called option-adjusted basis, which takes into account prepayment uncertainty, against interest-rate swaps have widened to negative 0.03 percentage point from as low as negative 0.22 percentage point on Dec 21, according to data.
Elsewhere in credit markets, at least $12.3 billion of US corporate bonds were marketed yesterday, the most since Feb. 4, when volume reached $18.85 billion, data show. DirecTV, the El Segundo, California-based satellite-television provider, sold $3 billion of 5-, 10- and 30-year notes.
Bank of America Corp, the largest US bank by assets, sold $2.5 billion of five-year notes.
The extra yield investors demand to own corporate bonds rather than government debt fell 1 basis point to 162 basis points, the lowest since Jan 21, according to Bank of America Merrill Lynch's Global Broad Market Corporate index. Average yields were 4.05 per cent, the index shows.
In Iran, Pars Oil & Gas Co issued $1 billion of euro-denominated bonds to help boost the development of its South Pars gas field, Press TV reported. The National Iranian Oil Co, POGC's parent, has guaranteed a return of as much as 8 per cent on the debt, the state-run news channel said.
Bombardier Inc, the world's third-largest commercial airplane maker, withdrew a proposed placement of senior notes citing "unfavourable conditions in the debt capital markets." Montreal-based Bombardier delayed a $1 billion sale of junk bonds after investors demanded a higher yield than the company had expected, people familiar with the matter said last month.
Krung Thai Bank Pcl, Thailand's second-biggest lender by assets, plans to sell as much as 10.4 billion baht ($318 million) of bonds to repay debt, its President Apisak Tantivorawong told reporters today in Bangkok.
PT Astra Sedaya Finance, a unit of Indonesia's largest automobile distributor, said it plans to sell 1.5 trillion rupiah ($163 million) of bonds to boost its ability to lend to consumers for vehicle purchases.
In the US, the cost of protecting against corporate defaults fell for a second day. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, declined 2.8 basis points to 82.5 basis points, according to CMA DataVision, the lowest since Jan 14.
The Markit iTraxx Japan index increased 1 basis point to 123 in Tokyo today, Morgan Stanley prices show. The Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings increased 1 basis point to 72.25, JPMorgan prices show.
Credit-swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years.
Swaps contracts to protect against default on Greek government debt declined 1 basis point to 279, the lowest since Jan 12, according to CMA prices at 9 am in London. Greece sold 5 billion euros ($6.8 billion) of notes last week and passed 4.8 billion euros of spending cuts, reducing the risk of default.