Fannie, Freddie $223 Billion Debt Rollover Problem

Fannie and Freddie have a looming $223 Billion Debt Rollover Problem.


Aug. 20 (Bloomberg) -- Fannie Mae and Freddie Mac's success in repaying $223 billion of bonds due by the end of the quarter may determine whether they can avoid a federal bailout.

Fannie, based in Washington, has about $120 billion of debt maturing through Sept. 30, while McLean, Virginia-based Freddie has $103 billion, according to figures provided by the government-chartered companies and data compiled by Bloomberg.
My Comment: It is a near certainty taxpayers will be bailing out Fannie and Freddie. The only questions now are about the size and exact nature of that bailout.

The Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie and Freddie by the end of next month, according to Bill Gross, who manages the world's biggest bond fund at Pacific Investment Management Co.
My Comment: Bill Gross made a huge bet on Fannie and Freddie. So far, I do not think it is working. More on this below.

Freddie Mac "continues to have strong access to the debt markets at attractive spreads," spokeswoman Sharon McHale said. Fannie spokesman Brian Faith declined to comment.

Investors this week demanded an extra 104 basis points in yield to own Freddie's five-year debt rather than Treasuries of similar maturity, the most since reaching a 10-year high of 114 basis points in March. The gap narrowed to 74 basis points after Paulson's announcement. A basis point is 0.01 percentage point.

Fannie spreads approached a 10-year high of 104 basis points on Aug. 18, from 74 basis points on July 28. In the decade before 2008, the spread averaged 43 basis points.
My Comment: Spreads are at record highs. Why Freddie spokeswoman Sharon McHale would call record spreads "attractive" is a mystery.

http://globaleconomicanalysis.blogspot.com/2008/08/fannie-freddie-223-billion-debt.html

anywhere in the world with a net worth of $1 B or more... 90 percent of their total assets if they have resided in the US or h=own significant shares of any company that sells products in the US.