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Members of the U.S. Navy Blue Angels fly over the World Trade Center in lower Manhattan as part of the 25th annual Fleet Week celebration in New York, May 23, 2012. REUTERS/Eduardo Munoz

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Shreen Mohammad sits with other recruits during a military exercise at the Kabul Military Training Center (KMTC) in Kabul March 28, 2012. A landmark NATO summit in Chicago endorsed an exit strategy that calls for handing control of Afghanistan to its own security forces by the middle of next year but left questions unanswered about how to prevent a slide into chaos and a Taliban resurgence after allied troops are gone. Picture taken March 28, 2012. REUTERS/Omar Sobhani (AFGHANISTAN - Tags: POLITICS MILITARY SOCIETY) ATTENTION EDITORS: PICTURE 18 OF 27 FOR PACKAGE 'AFGHAN ARMY RECRUIT'

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Spreads sharply tighter on Fed liquidity plan

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NEW YORK | Tue Mar 11, 2008 9:31am EDT

NEW YORK (Reuters) - Yield premiums on U.S. mortgage and agency debt are snapping sharply tighter Tuesday after the Federal Reserve announced a plan with other central banks to infuse the financial system with liquidity.

The Fed said it would allow dealers to use U.S. agency debt and mortgage debt, including private label mortgage securities, as collateral on the new facility.

Most U.S. agency debentures are as much as 13 basis points narrower.

Prices of agency 30-year MBS with 5-1/2 percent coupons are unchanged to yield 5.813 percent, in contrast with the 1-3/32 loss for 10-year Treasury notes.

The yield premium narrowed to 2.223 percentage points from 2.287 points late Monday, which was just shy of the 2.37-point spread last Thursday that was the highest closing yield premium in more than two decades.

The new lending facility, for up to $200 billion of Treasury securities to primary dealers, allows the use of collateral, including federal agency debt, federal agency MBS and non-agency triple-A-rated private label residential MBS.

(Reporting by Lynn Adler; Editing by Kenneth Barry)
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