REFILE-GSE subordinated debt weaker after S&P rating cuts

(Refiles to fix spelling of Standard & Poor's in first paragraph)

NEW YORK, Aug 11 (Reuters) - The cost to protect subordinated debt of Fannie Mae (FNM.N) and Freddie Mac (FRE.N) rose on Monday after Standard & Poor's slashed its ratings on those bonds and the preferred stock of the mortgage funding giants.

S&P slashed the preferred stock and subordinated debt ratings for both agencies by three notches to "A-minus," the seventh-highest rating, from "AA-minus," the fourth best, while affirming the overall ratings of the government-sponsored enterprises.

Fannie Mae's risk-to-the-government rating was lowered to "A" from "A-plus," while the designation for Freddie Mac was cut to "A" from "AA-minus," according to S&P. The rating measures a company's credit-worthiness without government support. For details, see [ID:nN11349182]

Five-year credit default swaps for Fannie Mae's subordinated debt widened to 258 basis points, or $258,000 a year to protect $10 million of debt, up from 247 basis points at Friday's close, according to data from CMA DataVision.

Similar contracts for Freddie Mac's subordinated notes widened to 259 basis points, from 245 basis points on Friday, CMA said.

The cost to protect both agencies' senior debt with credit default swaps had fallen before the rating action and spreads were still slightly tighter after S&P's actions.

Freddie Mac's five-year credit default swaps fell 2.5 percent to 48 basis points, or $48,000 a year to protect $10 million of debt, down from about 49 basis points at Friday's close, according to Markit Intraday.

Fannie Mae's five-year credit default swaps fell 1.3 percent, to 47.6 basis points, down from 48.25 basis points on Friday, according to Markit Intraday. (Reporting by Walden Siew; Editing by Dan Grebler)