Investors in Asia and Europe snapped up a $3 billion sale of Freddie Mac bonds at near record yields, a sign that the beleaguered mortgage finance company has the support of foreign central banks.
US mortgage firm Freddie Mac headquarters is pictured in McLean, Virginia July 13, 2008. [Agencies]
Investors outside North America including central banks bought 61 percent of the two-year notes on Thursday, Freddie Mac said. That compares with 55 percent in the company's last sale of securities with the same maturity in May.
Freddie Mac fell 64 percent in New York Stock Exchange trading during the past month and Fannie Mae lost 56 percent of its market value on concern they may not have enough capital to survive the housing slump. Treasury Secretary Henry Paulson announced a rescue plan for the nation's biggest mortgage companies on July 13 and the Wall Street Journal reported on Friday that Freddie Mac may sell $10 billion of new shares, citing people it did not identify.
"We're operating as business as usual this week," said Treasurer Timothy Bitsberger, who was assistant secretary for financial markets at the Treasury before joining the government-chartered company in 2006. "The dramatic change is that we're just under a very large, powerful microscope."
Freddie Mac and Fannie Mae rely on foreign institutions to finance their business. The Federal Reserve held $983.9 billion of so-called agency debt on behalf of international investors as of July 16, up from $950.9 billion on June 4 and $1.83 billion in 2003.
While some investors may have lost confidence in the companies, "all I know is that we've been able to sell paper this week," Bitsberger said.
Yields on the companies' debt rose relative to Treasuries this week as Paulson's plan to seek authority from Congress to pump equity into Fannie Mae and Freddie Mac and to increase their lines of credit met resistance from lawmakers.