10-11-13 10:55 AM EDT | Email Article

Fannie Mae (FNMA) is expected to lower yields on its debut securities that transfer risk of mortgage defaults to private investors after the $675 million deal garnered multiple times the required investor orders, according to investors considering the deal.

Fannie Mae and Freddie Mac (FMCC) have been courting private investors that have been reluctant to bet on new mortgage-credit risks since suffering steep losses in the financial crisis. The government-controlled firms are meeting demands of the Federal Housing Finance Agency, which wants to reduce risks to taxpayers who have paid $188 billion in bailouts to cover losses on standard Fannie and Freddie mortgage-backed securities.

The new "risk-sharing" issue from Fannie Mae is made up of synthetic notes whose value depends on the performance of $28 billion of mortgages acquired by the firm last year. The longer-term and riskier half of the two-part deal was initially oversubscribed by 17 times at a yield equivalent to 6.25 percentage points over the one-month London interbank offered rate, the investors said.

Fannie Mae will likely lower the yield spread premium before the deal's pricing, which isn't expected on Friday, investors said.

But the early demand on the deal, which was announced Thursday, may suggest that investors are quickly warming to accepting mortgage-credit risks for extra yield. Similar risk-sharing securities pioneered by Freddie Mac in July have rallied to about 5.85 percentage points over the Libor benchmark this week, from 7.15 points at the pricing.

Gains for Freddie Mac's issue show that "the market is hungry for credit-sensitive bonds," said Jeana Curro, a strategist at RBS Securities, at an asset-backed securities conference earlier this week.

A Fannie Mae spokesman declined to comment.

Write to Al Yoon at albert.yoon@dowjones.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


(END) Dow Jones Newswires

October 11, 2013 10:55 ET (14:55 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
Add a Comment

News   More...

Start Premium Trial Register For Free

P F Fund Financial Data (13,000+ funds)
P F Stock Financial Data (7,000+ stocks)
P F Stock and Fund Screeners (basic)
P F Investing Articles and Market Commentary
P F Articles Archive (>30 days)
P F Discuss (dozens of stock, fund, bond, and general bulletin boards)
P F Portfolio Manager (basic)
P F Morningstar Investment Classroom
P F Access Your Portfolio Anytime, Anywhere via Your Mobile Device
P   Morningstar Fund Analyst Reports (full research on 1,700 funds, ETFs, and CEFs)
P   Morningstar Stock Analyst Reports (full research on more than 1,100 stocks)
P   Portfolio Manager (advanced with 10 X-Ray analyses, including recommendations)
P   Portfolio Monitor (monthly and on-demand personalized portfolio statements)
P   Morningstar Proprietary Stock Information (stock star ratings, buy/sell prices, economic moat ratings, and more)
P   Morningstar 5-Star Stock and Fund Favorites & Red Flags eNewsletters
P   Premium Stock and Fund Screeners (advanced with nearly infinite ways to find the best securities for you)
P   Discounts on Morningstar newsletters, books, seminars, and more

Sign-up to Morningstar


Basic Access

Articles and Videos
Morningstar video reports, articles, data, and tools. Dig into our lineup of e-newsletters and investing classroom courses outlining sensible strategies for maximizing your investments.
Morningstar Discuss
Follow the buzz on individual stocks or fund families. Plus, read the latest posts from Morningstar members and analysts.
Portfolio Manager
Track your investments and watch lists with our Portfolio Manager. Customize your view with our comprehensive stock, fund, and ETF data.

Access these features and more when you sign up for Free Membership.
Join Morningstar today. It's Free.

Unlimited Access

Analyst Research
Gather in-depth, actionable insight on over 3,700 stock and mutual funds covered by Morningstar analysts. View our mutual fund Analyst Reports favored by professionals, savvy experienced investors, and new investors researching options for retirement savings, college plans, or other investment needs.
Portfolio X-Ray®
Ensure your portfolio is positioned exactly how you want with Morningstar's X-Ray Interpreter and Stock Intersection tools. A Barron's "Best of the Web" award winner for five years running, X-Ray Interpreter goes under the hood of your portfolio to provide a useful allocation, sector, and geographic analysis. And you can discover how much of a stock you really own, individually and through mutual funds, with Stock Intersection.
Investment Picks
Find new 5-star stocks (greatly undervalued companies) to consider daily. Our 5-star stock rating is a proven winner, consistently beating benchmarks like the S&P 500. Plus, browse our Fund Analyst Picks and Stewardship Grades to find shareholder-friendly mutual funds that are poised for outperformance.
Portfolio Monitor
Get a clear view of your investments with personalized reports about your portfolio. Receive monthly statements and generate reports on-demand to help you stay on track to meet your investment goals.

Access these features and more when you sign up for Premium Membership.
Start your free 14-day trial today online
Your subscription may be tax deductible. Please contact your tax advisor.

Content Partners
Morningstar - 2013/10/11 - Fannie Mae Seen Lowering Yields on Debut Securities
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Author |  Collection |  Interest |  Popularity

Previous: Fannie Mae Reports Net Income of $8.7 Billion and Comprehensive Income of $8.6 Billion for Third Quarter 2013  |  Next: Fannie, Freddie common shares extend plunge