Mortgage giant Freddie Mac (FRE) launched its largest-ever debt issue of $10 billion in three-year notes Wednesday.

This may be the latest testament to investors' icnreasing confidence of 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 Freddie's current issue.

This week's issue was launched with a price guidance of 88 basis points over comparable 3-year Treasury yields. The deal is expected to price Wednesday, and settle Thursday. Currently, risk premiums on Fannie's 2% three-year note is tighter by 5 basis points at 67 basis points over comparable Treasury yields, according to TradeWeb data.

The lead managers on the deal are J.P. Morgan Chase, Morgan Stanley and UBS Investment Bank.

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.

-By Prabha Natarajan, Dow Jones Newswires, 201-938-5071; prabha.natarajan@dowjones.com