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By Joy Wiltermuth
NEW YORK, Aug 8 (IFR) - Freddie Mac is looking to European
investors to help anchor its year-old risk-sharing RMBS bond
program, which like a similar program from Fannie Mae, has
recently been rattled by volatility.
Margin calls in recent days on several hedge fund investors,
the dominant buyers of longer, non-rated tranches of these
bonds, have highlighted areas of fragility in the new asset
Bankers told IFR in the past week that both Freddie and
Fannie have been looking to find more stable hands for a bigger
share of their bonds as these programs mature.
Freddie Mac's Mike Reynolds, a director overseeing the
agency's Structured Agency Credit Risk (STACR) risk-sharing
program, said in an interview with IFR that work has already
begun to widen the investor base by bringing in buyers across
"Keep in mind, it's a brand new market," Reynolds said. "At
one year old, it's very natural for a market to find the right
level after spreads tightened on each deal until a few weeks
Prices on unrated risk-share notes gapped out from tights of
one-month Libor plus 240bp to 400bp and higher, a head trader at
a bank said.
Spreads as of Friday morning had settled back to roughly
375bp, he said, but noted the choppy markets may have taken the
"new car smell" off the product.
"There was so much interest early on in the program -
investors had been working with Freddie and Fannie for a year by
the time the programs came to market," the trader said.
Last month, Freddie met with 25 different EU clients on its
latest STACR issue to introduce some to the platform for the
The trade, which priced mid-week at levels much wider than
Fannie Mae's bond in July, was the first from the STACR series
to include language that Freddie had retained an 5% economic
stake in the transaction, Reynolds said.
A key to rustling up EU buyers has been getting US deals to
adhere to new EU risk retention standards, which took hold in
January and penalise heavily buyers in the region that hold
"Each investor needs to assess on its own in
Europe," Reynolds said.
The push to Europe comes as issuers with new bonds tied to
US homes ended up paying more to offload their latest round of
The Blackstone Group, with its third single family rental
bond (SFR), was also the first in its sector to go down the EU
compliance route by retaining 5% of the deal's bottom
It priced on Monday 10-75bp wider than its prior trade in
"As a general thing, money managers in Europe are looking
for steady supply, perhaps even more so today at spreads that
are attractive to them," Reynolds said.
Calls and an email to Fannie Mae for comment were not
(Reporting by Joy Wiltermuth; editing by Shankar Ramakrishnan
and Anil Mayre)