Fannie Mae Sells $4 Billion Worth of Benchmark Notes

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Fannie Mae, the biggest buyer of residential mortgages in America, said it sold $4 billion in five-year benchmark notes at lower yields relative to Treasury debt than its previous sale of the maturity.


Fannie Mae sold the notes at a yield of 5.245%, or 34.5 basis points more than the five-year Treasury note, it said in a statement e-mailed yesterday. The Washington-based company sold $3 billion in five-year notes in January at a yield spread of 35.5 basis points. A basis point is 0.01 percentage point.


Benchmark notes are the largest and most frequently traded of Fannie Mae’s $753.3 billion in debt.


Five-year yields on both government and so-called agency notes have risen since January as investors demanded more return to compensate them for the risk inflation may accelerate. Five-year Treasury notes yield about 4.92%, up from about 4.5% at the end of January.


Fannie Mae also sold yesterday by Internet auction an additional $1 billion of its 10-year benchmark notes first issued in February at a high yield of 5.409%, or about 38 basis points more than Treasuries. The notes in February were sold at a yield of 5.004% and a yield spread of 39 basis points more than Treasuries.


Fannie Mae, created by the government in 1938 to provide financing for home mortgages, and McLean, Va.-based Freddie Mac own or guarantee about 40% of the $8.8 trillion mortgage market. The companies sell debt to fund their combined $1.4 trillion in mortgage investment portfolios.


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