November 19, 2007 / 4:24 PM / 10 years ago

UPDATE 2-Fannie Mae, Freddie Mac debt protection costs rise

(Adds Freddie Mac, updates prices)

NEW YORK, Nov 19 (Reuters) - The cost to insure the debt of Fannie Mae FNM.N and Freddie Mac FRE.N rose on Monday amid concerns over losses from subprime mortgages.

Fannie Mae’s swaps rose almost 11 percent to 55.5 basis points, or $55,500 per year for five years to insure $10 million in debt, according to Markit Intraday.

Freddie Mac’s swaps rose 9.5 percent to 54.82 basis points, Markit data showed. The swaps of both agencies traded around 27 basis points at the end of October.

Fannie Mae’s default swaps have weakened amid concerns over loss accounting at the largest provider of funding for U.S. residential mortgages.

This month Fannie Mae attributed $670 million in credit loss reserves to charge-offs taken as it purchased troubled loans out of mortgage bond trusts.

Freddie Mac, meanwhile, weakened after a Credit Suisse research report said the company may report a loss of between $1 billion to $5 billion on its subprime “AAA” portfolio. For details, see [ID:nN19270155]

Swaps on both agencies as of Friday were trading as though rated “Baa1,” the third lowest investment grade and seven notches below their actual “Aaa” ratings, according to data by the credit strategy group at Moody’s Investors Service. (Reporting by Karen Brettell; editing by Leslie Adler)

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