Magazine article American Banker

Fannie, Freddie Expand Debt Offerings to Reach Treasury-Type Investors

Magazine article American Banker

Fannie, Freddie Expand Debt Offerings to Reach Treasury-Type Investors

Article excerpt

Investors have developed a hearty appetite for the debt issues of Fannie Mae and Freddie Mac as the Treasury has reduced its issuance of debt.

Both Fannie and Freddie have taken the opportunity to build their own yield curves with noncallable debt offerings. And last week Fannie extended its curve with a 30-year Benchmark bond.

Now Fannie Mae has two-, three-, five-, seven-, 10-, and 30-year securities outstanding in its Benchmark note and bond program. Freddie Mac has two-, three-, five-, and 10-year securities outstanding in its Reference Note program.

Both programs are providing investors with liquidity that is particularly important "when issuance of Treasury securities will be declining in relative importance," said Larry Hill, executive vice president for Investment Advisers Inc., a subsidiary of Lloyds TSB Group in Minneapolis.

Mr. Hill said he has invested primarily in government-sponsored enterprise securities with durations of 10 years and less. He said he did not participate in Fannie's latest 30-year bond offering because it was "overpriced relative to the outstanding paper."

One Wall Street trader said that his firm had pitched the idea for a 30- year note to Fannie Mae 10 months ago and was pleasantly surprised by the offering.

A 30-year bond will create a "full credit curve" that will probably aid in analysis of the debt market, he said.

But Fannie's market timing coincided with a downturn in the bond market. …

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