Fannie Mae Record $15 Billion 2-Year Note Launches At Treasurys +68BPS
February 26 2009 - 11:00AM
Dow Jones News
Fannie Mae's (FNM) record $15 billion two-year note has launched
at 68 basis points over comparable Treasurys, according to a person
familiar with the deal.
The size of the deal, which had orders around $20 billion, shows
that markets supported by the government continue to see interest
for investors looking for a safe haven.
"The market response to the two-year Fannie, with a book
reported in excess of $20 billion" was "directly related" to price
concessions, Jim Vogel of FTN Financial said in a note to
clients.
The premium is over 20 basis points when compared with existing
bonds of similar duration.
This is the second bond deal this month from the mortgage
finance company, and it is offered in a favorable environment.
Huge investor demand for these issues has driven up the size of
the handful of previous debt offerings by both Fannie and Freddie
Mac (FRE) this year.
Earlier this month, Fannie sold a larger-than-expected $7
billion of five-year benchmark notes.
Fannie's previous two-year $7 billion deal sold on Sept. 10,
2008, at 70 basis points over Treasurys to yield 2.896%.
U.S. investors had bought 63% of that deal and Asian investors
bought 12% of it.
The Federal Reserve's support of this market through its
purchase of debt securities issued by Fannie, Freddie and the
Federal Home Loan Bank system, and the perceived tightening of ties
between the government and the mortgage companies has boosted
investor interest.
The central bank to date has bought $35.7 billion of these debt
securities from investors, and is expected to buy $100 billion
worth, or more, if necessary.
In addition, recent announcements from the U.S. Treasury -
including the increase to $200 billion each of the credit lines
offered to Fannie and Freddie if their net worth turns negative -
have rallied investor confidence.
An added lure to buyers has been the good performance in the
secondary market of agency bonds in the past couple of weeks. The
tightening of risk premiums, especially when compared with the
widening of some of the corporate bonds issued with the Federal
Deposit Insurance Corp. guarantee, has brought fresh buyers to this
market.
Joint leads on the Fannie deal, due to be sold later Thursday,
are J.P. Morgan, Barclays Capital and UBS Securities.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371;
anusha.shrivastava@dowjones.com
(Prabha Natarajan contributed to this report)