Fannie Mae prices $4 billion Benchmark Notes, issue oversubscribed, tightens in trading

By Lisa Kerner

Charlotte, N.C., April 2 - Fannie Mae priced $4 billion of new 1.875% three-year Benchmark Notes on Thursday at 74 basis points over Treasuries and the securities tightened markedly after pricing.

One trader said the notes finished trading Thursday at 69 bps bid.

The notes had already come to market at much stronger levels than had been expected. One source told Prospect News on Wednesday that he expected a spread in the 80 bps area.

According to the trader, the oversubscribed notes saw a book of $9 billion, which when coupled with the gains in the stock market registered Thursday "gave the market a positive tone."

The Benchmark Notes sold primarily in the United States, which took down 75.2% of the total, according to Fannie Mae.

Other regions were Asia, which accounted for 16.3%, followed by Europe at 3.2%, the agency said.

Investors were led by fund managers at 65.4%, followed by central banks at 20.3% and insurance companies at 7%, according to Fannie Mae.

The new Benchmark Notes mature April 20, 2012 and priced at 99.874 to yield 1.918%.

Agency spreads were "very firm" on Thursday, the trader said, with the two-year sector tighter by 1 to 2 bps.

There was "generally good buying across the board," the trader said.

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