Agency spreads are driving all spreads higher

Here's a chart of 5-yr swap spreads vs 5-yr agency spreads (FNMA vs
treasuries). Looks like most of the upward pressure on all spreads
(swaps and credit spreads) is coming from the agency sector. Agency
spreads are typically the lowest of any, since they have the quasi
government guarantee behind them. If agency spreads blow out, all
other spreads have to follow, albeit typically to a lesser extent.
Swap/agency spreads are now about as tight as they have ever been,
with the notable exception being the BSC crisis last March.