(Recasts, adds Freddie note sale, foreign demand, quotes,
NEW YORK, Sept 3 Fannie Mae FNM.N and Freddie
Mac FRE.N drew solid demand for $5 billion of new securities
on Wednesday even as large overseas investors cut their
exposure to the two troubled housing finance companies.
The latest sales underscored their continued access to debt
funding that is key to running their businesses and supporting
the U.S. housing market.
Freddie Mac sold $3 billion of two-year notes to yield
0.975 percentage point more than Treasuries, up from 0.88 point
at its July sale of the same maturity.
Investors were heartened that Asian demand rose slightly
from the prior offering given that overseas investment has
fallen off in recent months after the pair reported more than
$13 billion in losses.
Traders said the Freddie note issue attracted more orders
than the amount offered, and the yield premium shaved to about
96 basis points soon after the pricing.
"This seems to be the pattern. They announce a deal, it
widens out that sector, the deal goes well and the entire
market snaps in as soon it gets the news on how it went," said
Brandon Wann, senior vice president of government and agency
trading at Vining Sparks in Memphis, Tennessee.
When Freddie Mac announced the note sale on Tuesday the
initial spread talk was 95.5 basis points, but the spread at
the pricing increased as agencies generally underperformed
Treasuries on Wednesday.
"Until we get some more news out of the Treasury on how
they're going to treat Fannie and Freddie, if we get any, I
think that the supply will trade on a similar pattern where it
widens out just before pricing and then if the deal goes okay
the deal should trade well," Wann added.
The government has said it may have to intervene and
provide funding for the two companies should their financial
Freddie Mac said it sold 53 percent of the new two-year
notes to investors in North America, 34 percent to accounts in
Asia, 11 percent in buyers in Europe and 2 percent in other
In Freddie Mac's July $3 billion two-year offering, 35.9
percent was placed in North America, 32.6 percent in Asia, 28.2
percent in Europe and 3.4 percent to others.
Central banks and investment managers were the biggest
buyers for the new issue, each accounting for 39 percent of the
securities, based on preliminary figures.
The degree of foreign investment has been scrutinized as
Fed data have shown central banks shedding agency-related
assets all through the latter half of the summer.
Bank of China (601988.SS), for example, late last month
said it had reduced its holdings of securities tied to Freddie
Mac and Fannie Mae to $12.67 billion from $17.3 billion.
Shares of Freddie Mac were up about 1 percent while shares
of Fannie Mae were down about 1 percent at midday.
To read more on Fannie Mae's bill auctions on Wednesday
click on [ID:nN03430111] and to see Freddie Mac's note sale
results click on [ID:nWNAB9256].
(Reporting by Lynn Adler; Editing by Tom Hals)