Agency Market (as of July 1st, 2009)

Two year spreads were 2 basis points to 3 basis points tighter. Five year sector paper is unchanged and 10 year sector paper is unchanged to a basis point tighter.

Investor flows were minimal as participants await the monthly labor lottery tomorrow morning.

One trader also noted that the two year agency sector benefited from the salutary effect of comments by Ms Yellen that the funds rate could remain at zero for years.

Corporate Bonds (as of July 1st, 2009)

One syndicate desk operative and long time friend of the blog expects that the pace of issuance will diminish over the next several weeks. That will be a result of the blackout period surrounding earnings releases in July.

The same gentleman thought that the second half of July would bring heavy issuance. He thought the issuance would be plain vanilla investment grade and junk paper . He thought that there is s strong bid in each market.

I noted that the response to the Oracle deal had been less than festive. He replied that this holiday week with quarter end was a horrible backdrop for a deal of that size ($4.5 billion) and the deal was fully priced.

MBS and Swap and Vol (as of July 1st, 2009)

The three month ATM 10 year swaption straddle which it is my custom to chronicle here is 676 mid.

Swap spreads are mixed. Two year spreads are 1 1/4 basis points wider at 42 3/4. Three year spreads are 1 3/4 basis points wider at 54 1/2. Five year spreads are 1/4 basis point wider at 41 1/2. Seven year spreads are 2 basis points tighter at 20. Ten year spreads are 1 basis point tighter at 23 1/4. Thirty year spreads are 1 1/2 basis points narrower at NEGATIVE 15 1/2.

MBS (as of July 1st, 2009)

There has been robust buying of premium coupons in MBS and the 6s are a star performer gaining 2/32.