WASHINGTON - Fannie Mae, the nation's largest source of mortgage funding, is to announce this week its most ambitious sale of debt securities: a three-part transaction that could be as large as $9 billion.
Traders said the sale could range from $6 billion to $9 billion and that Fannie will probably choose to sell at least $3 billion of new three-year issues, reopen a 10-year note to bring in more than $2 billion, and reopen a 30-year bond to bring in at least $1 billion.
Fannie Mae said it plans two- or three-year, 10-year, and 30-year issues but that it has not determined the amounts in any category. This would be the first sale of three different maturities on the same day by the government-sponsored enterprise through the "benchmark" note and bond program it began in January 1998. Through June 30, it had sold $130.5 billion of benchmark notes and bonds.
The securities are to be priced Aug. 2. Fannie has yet to choose the securities firms to handle the sale.
The debt program mimics the way the government sells debt, with a full range of maturities and a set schedule. Partly because of the regularity and large size of its debt sales, the company can borrow at cheaper rates than other private companies.
The sale schedule lets investors and traders hedge the securities with more ease, and the large size of the issues makes them easier to trade in the secondary market.
Fannie uses the proceeds to buy home mortgages from lenders. It is a shareholder-owned company, though chartered by the government to provide mortgage funding.