Fannie Mae sold $3 billion of debt Tuesday, paying lower yields than government-guaranteed bank bonds and borrowing for less relative to benchmarks than the records set in its last sale.

The five-year benchmark notes were priced to yield 2.906%, or 121 basis points more than Treasuries of similar maturity. Last month the government-sponsored enterprise sold $1 billion of five-year notes at a record spread of about 132 basis points.

Tuesday's sale was Fannie's first offering since Sept. 10 of a new issue maturing in more than a year.

Last week the Federal Reserve Board purchased $5 billion of so-called agency debt under a $100 billion program intended to lower mortgage costs.

Spreads on agency debt — the long-term borrowing of Fannie, Freddie Mac, and the Federal Home Loan Bank System — declined from their all-time highs after the Fed announced plans Nov. 25 to buy the notes and $500 billion of agency mortgage securities.

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