By Richard Leong
NEW YORK, Dec 16 (Reuters) - The costs to exchange U.S. fixed-rate interest payments for floating-rates tumbled on Tuesday after the Federal Reserve cut its target on key short-term interest rates near zero percent.
Moreover, the U.S. central bank repeated its stand to deploy all methods to resuscitate a flagging economy and stimulate lending. For more, see
The untraditional tools that Fed will implement include purchases of mortgage-backed and related securities issued and guaranteed by mortgage finance agencies -- Fannie Mae and Freddie Mac -- in a bid to lower mortgage rates and help a struggling housing market, analysts said.
'Spreads screamed tighter today after the Fed reiterated its decision to purchase large volumes of GSE debt and MBS,' UBS analysts wrote in a research note.
The yield spread on U.S. two-year interest rate swaps over Treasuries collapsed to a level not seen since early September, prior to the demise of U.S. investment bank Lehman Brothers.
Two-year swap spread, which shrinks with increased risk appetite, narrowed more than 15 basis points, the biggest one-day tightening in two months.
Two-year swap spread was last quoted at 86.75 basis points compared with 103.75 basis points late on Monday.
Other swap spreads also strengthened in anticipation of stronger demand for non-Treasury bonds.
Ten-year spread shrank to 14.75 basis points from 22.50 basis points late Monday, while 30-year spread ended steady at minus 31.50 basis points. -----------------------------SWAP SPREADS--------------------- Dec 16 Dec 15 Dec 12 Dec 11 Dec 10 Dec 9 Dec 8 2-YR 86.75 103.75 105.75 105.25 105.75 117.50 117.75 3-YR 84.75 100.00 100.50 96.50 103.50 113.25 112.00 5-YR 75.25 87.50 85.50 87.75 90.75 98.25 93.75 10-YR 14.75 22.50 19.50 20.50 23.50 30.00 26.00 30-YR -31.50 -26.50 -31.75 -36.50 -38.75 -35.25 -39.25 Keywords: MARKETS SWAPS (richard.leong@thomsonreuters.com; +1-646-223-6313; Reuters Messaging: richard.leong.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Dec 16 (Reuters) - The costs to exchange U.S. fixed-rate interest payments for floating-rates tumbled on Tuesday after the Federal Reserve cut its target on key short-term interest rates near zero percent.
Moreover, the U.S. central bank repeated its stand to deploy all methods to resuscitate a flagging economy and stimulate lending. For more, see
The untraditional tools that Fed will implement include purchases of mortgage-backed and related securities issued and guaranteed by mortgage finance agencies -- Fannie Mae and Freddie Mac -- in a bid to lower mortgage rates and help a struggling housing market, analysts said.
'Spreads screamed tighter today after the Fed reiterated its decision to purchase large volumes of GSE debt and MBS,' UBS analysts wrote in a research note.
The yield spread on U.S. two-year interest rate swaps over Treasuries collapsed to a level not seen since early September, prior to the demise of U.S. investment bank Lehman Brothers.
Two-year swap spread, which shrinks with increased risk appetite, narrowed more than 15 basis points, the biggest one-day tightening in two months.
Two-year swap spread was last quoted at 86.75 basis points compared with 103.75 basis points late on Monday.
Other swap spreads also strengthened in anticipation of stronger demand for non-Treasury bonds.
Ten-year spread shrank to 14.75 basis points from 22.50 basis points late Monday, while 30-year spread ended steady at minus 31.50 basis points. -----------------------------SWAP SPREADS--------------------- Dec 16 Dec 15 Dec 12 Dec 11 Dec 10 Dec 9 Dec 8 2-YR 86.75 103.75 105.75 105.25 105.75 117.50 117.75 3-YR 84.75 100.00 100.50 96.50 103.50 113.25 112.00 5-YR 75.25 87.50 85.50 87.75 90.75 98.25 93.75 10-YR 14.75 22.50 19.50 20.50 23.50 30.00 26.00 30-YR -31.50 -26.50 -31.75 -36.50 -38.75 -35.25 -39.25 Keywords: MARKETS SWAPS (richard.leong@thomsonreuters.com; +1-646-223-6313; Reuters Messaging: richard.leong.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.