Fannie Mae planned to raise $2 billion Monday in its first long-term debt sale in two months after being shut out of the market by investors concerned that the government takeover did not provide a sufficient bond guarantee.

The offering was split evenly between five-year and three-year notes.

The government-sponsored enterprise's last sale of debt lasting over a year took place Sept. 10, four days after the government seized Fannie and Freddie Mac and agreed to support their debt.

The enthusiasm that lowered the companies' debt yields over benchmark rates after the takeover evaporated when the government announced plans to guarantee bank company debt and created competing investments seen as having more explicit government backing. Spreads on Fannie's two-year notes surged as high as 158 basis points Oct. 30, compared with a five-year average of 22 basis points before this year.

Ira Jersey, the U.S. interest rate strategist for Credit Suisse Group in New York, called the planned debt auction "the testing of the waters."

The five-year notes were priced Monday morning to yield about 132 basis points more than Treasuries of similar maturity, compared with an average spread of 130 basis points on Fannie's five-year notes outstanding. The three-year notes were scheduled to be priced Monday afternoon.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.