Freddie's $10 Billion, 3-Year Note Sold At Treasurys +88 BPs
18 Februar 2009 - 7:22PM
Dow Jones News
Mortgage giant Freddie Mac (FRE) sold its largest-ever debt
issue of $10 billion in three-year notes Wednesday.
The 2.125% bond was priced at its launch price guidance of 88
basis points over comparable 3-year Treasury yields, a premium over
current trading levels on comparable bonds.
Freddie's new note due March 23, 2012, priced at $99.636 to
yield 2.247%.
Currently, risk premiums on Fannie's comparable 2% three-year
note is tighter by 3.5 basis points at 68 basis points over
comparable Treasury yields, according to TradeWeb data.
However, the demand for the deal may be the latest testament to
investors' increasing confidence in the government's support
extended to Freddie and its sibling Fannie Mae (FNM), both of which
were put under conservatorship by its regulator last September.
The mortgage-finance company seems to be well past the days when
buyers demanded higher premiums on debt due to mounting concerns
about its capital, and whether the extent of government backing
would be enough to pull the mortgage finance companies through the
housing crisis.
"Investors are becoming more comfortable with the reality of the
GSEs' relationship with the government," said Margaret Kerins, head
of agency strategy at RBS Greenwich.
In addition, the announcement on Wednesday of the U.S. Treasury
Department's increase of its preferred stock purchase agreement to
$200 billion from $100 billion bound the two companies closer to
the government, she said. The measure is expected to ensure the
companies' net worth stayed positive despite expected losses in the
next few quarters.
This relationship may be further cemented if the Office of
Management and Budget decides to move Fannie and Freddie onto the
federal budget at the end of this month.
Debt-market investors are factoring in this potential
"nationalization" as they flock to buy Fannie and Freddie debt.
This three-year note is Freddie's second foray into the debt
markets this year. Previously, it raised $3.5 billion of five-year
and $3 billion of two-year securities in January. These capital
raises would allow the mortgage company to continue guaranteeing
and buying mortgage bonds.
The lead managers on the deal are J.P. Morgan Chase, Morgan
Stanley and UBS Investment Bank.
-By Prabha Natarajan, Dow Jones Newswires, 201-938-5071;
prabha.natarajan@dowjones.com