By Prabha Natarajan Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Fannie Mae (FNM) returned to the long-term debt market, after taking a hiatus in October, to raise $2 billion Monday.
The mortgage finance company, however, had to pay a higher risk premium than it had when it sold similar securities this summer, indicating that buyers of its debt remain cautious about the company's future.
This adds to Fannie's already heavy burden of shoring up the U.S. housing market while its capital base continues to erode.
In October, the housing finance giant canceled its scheduled fundraising in debt markets, relying instead on the riskier strategy of using short-term debt to fund its longer-term mortgage asset purchases.
Monday's auction was a way for the mortgage company to gauge investor demand for its debt, which froze in October. The deepening of the credit crisis that month forced Fannie and its sibling, Freddie Mac (FRE), to cancel issuance of long-term bonds. Freddie also scrapped its debt offering scheduled for November.
Banks were the main buyers of the $1 billion of five-year notes and $1 billion of three-year notes, that carried the same maturity and terms of existing debt sold last summer.
Fannie paid a risk premium of 1.43 percentage point over comparable U.S. Treasurys on its three-year note offering for a yield of 2.948%. This bond fetched a risk premium of 1.23 percentage point when it was sold in August.
Fannie sold the $1 billion of five-year notes with a risk premium of 1.28 percentage point for a yield of 3.59%. This is a half-percentage point higher than the premium charged in June for the same bonds.
The increase in perceived risk in Fannie's debt comes after the U.S. government took it and its sibling Freddie Mac (FRE) over in September in an effort to shore up confidence in these companies that guarantee more than half of the nation's $10 trillion of mortgages.
In October, investors began to worry again about the future of these companies, even under the government's wing, as the financial crisis widened. Risk premiums on their existing debt widened dramatically as investors demanded higher compensation.
This context led many market participants to expect buyers of Fannie's debt Monday to demand equally lofty premiums.
"The premiums were not out of line with where the market has been trading in the past weeks," said Mark Noble, head of the agency desk at MF Global.
Fannie said in its third-quarter filing that it has been having trouble raising money since July. International investors shied away from debt and mortgage securities issued by the twin government-sponsored enterprises.
This lack of buyers, Fannie said in its filing, had made it difficult "to issue debt securities with maturities greater than one year."
Margaret Kerins, agency strategist with RBS Greenwich Capital, said Fannie's Monday capital raising in the debt markets should help the company address some of these issues, at least for the short-term.
-By Prabha Natarajan, Dow Jones Newswires, 201-938-5071; prabha.natarajan@ dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=CxbIWcpkX458Gn1gNjc7DQ%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2008 17:21 ET (22:21 GMT)

Publié le 17 novembre 2008 Copyright © 2008 Dowjones