15 Jul 2008

'Business as usual' at $US3b debt issue by Freddie Mac

9:41 pm on 15 July 2008

Stronger demand than usual is reported for a $US3 billion debt sale by United States mortgage company Freddie Mac on Monday.

Freddie Mac and Fannie Mae have been put under Federal Reserve oversight and given a bigger line of credit.

On Sunday, the US Treasury and the Federal Reserve said they would lend money and buy equity if needed to rescue the two pillars of the US housing market.

Their share prices sank last week on fears they may struggle to raise funds.

Monday's $US3 billion debt sale from Freddie drew stronger demand than a similar one on 7 July.

Freddie's treasurer said the sale was "business as usual" and he did not perceive a crisis of investor confidence.

The two companies rely on regular debt auctions for their funding.

Fannie announced that it will sell $US3 billion of debt on Wednesday.

Fannie and Freddie own or guarantee almost half of the value of all US mortgages - $US5 trillion of debt. Foreign central banks, mostly in Asia, hold $US979 billion of the bonds and mortgage-backed bonds sold by the agencies.

The White House says Fannie and Freddie had not tapped any of the lifelines offered by the Treasury and Federal Reserve on Sunday.

However, shares of Fannie Mae fell 5.1% to $US9.73 on the Dow Jones index on Monday. Those of Freddie Mac slid 8.3% to $US7.11.