Asian investors unloaded more than half a billion dollars in agency debentures in three trading sessions last week, according to sell-side officials. The transactions mark the biggest sell-off in almost a month, according to one trader, and partly caused Fannie Mae 10-years to widen 2.5 basis points versus 10-year swaps over a week and a half. The sell-off is considered the main factor driving the spread widening, according to agency professionals.
Even though it may seem like only a blip, the widening is considerable considering over the past year, agency spreads have only moved a total of 16bps, according to Arthur Frank, director of MBS research at Nomura Securities International.
The sell-off was conducted by a variety of Asian investors, including a mixed bag of private investors and central banks, many of which close their books on March 31 and may be taking profits on agency bonds, Frank said. Investors seemed to be targeting maturities five years and up, specifically issues that had richened such as the Freddie Mac Nov. '13s and Jan. '15s and the Fannie Mae Oct. '14s, according to one trader. He and Frank declined to name specific investors.
