REFILE-UPDATE 1-Freddie Mac launches $8 bln notes

(Corrects day of week from Wednesday in second paragraph)

By Al Yoon

NEW YORK, May 20 (Reuters) - Freddie Mac (FRE.N), the No. 2 U.S. housing funding company, on Tuesday launched $4 billion in two-year and $4 billion in five-year reference notes for an expected pricing on Wednesday, sources said.

The issues, along with an additional $1 billion sold in a private placement, make up the largest weekly sales of Freddie Mac's trademark bonds in more than two years. The issues, which offer about 0.005 percentage point more yield than existing issues, have drawn strong demand, according to a Deutsche Bank AG trader on a conference call on Tuesday.

Freddie Mac's two-year notes due June 28, 2010 have drawn $4.2 billion in investor orders, according to the trader. Deutsche, Credit Suisse and Merrill Lynch & Co. are lead underwriters on the issue.

The five-year notes maturing on June 28, 2013 have $4.3 billion in orders, the trader said. Freddie Mac hired Banc of America Securities, JP Morgan Chase & Co. and RBS Greenwich Capital to manage the longer-term issue.

Debt sales fund Freddie Mac's $738 billion investment portfolio, which is set to expand rapidly for the first time in at least five years as the company responds to calls from regulators and lawmakers to stabilize the U.S. housing market. The size of the offerings surprised investors and come less than a week after the company said it would earmark billions of dollars in capital to back investment growth.

Demand for "agency" debt has been particularly strong from central banks in Asia, Ralph Axel, a Deutsche Bank analyst, said on the conference call. (Additional reporting by Caryn Trokie)