By Jody Shenn
Aug. 27 (Bloomberg) -- Fannie Mae, the largest U.S. mortgage-finance company, sold $2 billion of short-term notes at its highest yields versus benchmark rates in a weekly auction since July 23 to attract buyers.
Fannie Mae sold $1 billion of three-month notes at a yield of 2.58 percent, the Washington-based company said. That's about 89 basis points more than U.S. Treasuries and 23 basis points less than the three-month London interbank offered rate, compared with 76 basis points and 31 basis points in a sale last week.
Rising loan delinquencies and four straight quarterly losses has boosted the relative short-term borrowing costs for Fannie Mae and smaller competitor Freddie Mac. U.S. Treasury Secretary Henry Paulson, who last month was granted the power to inject capital into the government-chartered companies in a bid to restore confidence, hasn't detailed plans for any support, leaving some bond buyers wary.
``The rising spreads clearly show some buyers are backing away from the market, but in general I think money funds continue to buy and hold Fannie and Freddie debt,'' Peter Crane, president of Crane Data LLC, a firm in Westborough, Massachusetts, that tracks money-market funds. ``They assume the short-term money market debt will be safe and covered.''
Fannie Mae also sold $1 billion of six-month debt today at a yield of 2.87 percent, about 93 basis points above Treasury bills and 28 basis points below six-month Libor, compared with 88 basis points and 31 basis points last week. A basis point is 0.01 percentage point. Three-month Libor is currently set at 2.81 percent, while six-month Libor is at 3.12 percent.
No Place to Go
Freddie Mac raised $1 billion of one-month debt today at a yield of 2.28 percent, or 18 basis points more than one-month Libor, according to separate data from the company.
Congress created Fannie Mae and McLean, Virginia-based Freddie Mac to expand homeownership by increasing mortgage financing and to provide market stability. The companies make money by holding mortgage assets and on guarantees of mortgage- backed securities they create out of loans from primary lenders.
Yield spreads on short-term agency debt, the term for notes sold by Fannie, Freddie and the government-chartered Federal Home Loan Banks, have been mostly below historical averages this year, according to data complied by Bloomberg.
``There's no other place to go, now that money funds are out of SIVs,'' Crane said. ``A lot of people are looking at the rise in spreads as a godsend.''
Sales of commercial paper by SIVs, or structured investment vehicles, once an almost $400 billion market, halted in mid-2007 after buyers became concerned that some of the funds invested in bonds tied to subprime mortgages. SIVs use short-term borrowing to buy higher-yielding assets.
Average Rates
Yields on 90-day agency debt have averaged 50 basis points below 3-month Libor, the average rate banks charge each other for loans, compared with 18 basis points in the five years ended June 30, 2007. Since mid-2007, the spread reached as high as 95 basis points on Sept. 13, and as low as 15 basis points on July 23.
Two days ago, Freddie Mac sold $1 billion of three-month notes at a yield of 2.58 percent, or about 90 basis points more than similar-maturity U.S. Treasuries and 23 basis points less than Libor. The spreads from last week's sale were 61 basis points over Treasuries and 32 basis points below Libor.
The company also sold $1 billion of six-month debt at a yield of 2.858 percent, a spread of about 92 basis points above Treasuries and 25.5 basis points below Libor, compared with 80 basis points and 32 basis points last week.
Fannie Mae and Freddie Mac's rising relative borrowing costs have come with spreads on the mortgage-backed securities they invest in also climbing. The option-adjusted spread on fixed-rate home-loan bonds guaranteed by the companies or U.S. agency Ginnie Mae climbed 151 basis points yesterday, from 108 basis points on June 2, according to Lehman Brothers Holdings Inc. data.
To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.
Dolgado
The Indonesia Stock Exchange Consultant
dolgado.blogspot.com
0 comments:
Post a Comment