Yields on the $1.7 trillion of corporate debt from Fannie Mae and Freddie Mac relative to benchmarks rose to records Thursday, as GMAC LLC's application to be a bank holding company created the potential for more competition from issuers of government-backed debt.

The difference between yields on Fannie's five-year debt and similar-maturity Treasuries rose 11.5 basis points, to a record 164.9 basis points Thursday morning.

Last month investors sent spreads on so-called agency debt — mainly borrowing by Fannie, Freddie, and the Federal Home Loan banks — to records after the government announced plans to guarantee bank debt, creating more investments with government support.

"Until some confidence is restored, everything but things perceived to be the absolutely safest — blue-chip asset classes, basically Treasuries — is going to continue to underperform severely," Rob Fine, the president of Broadpoint Capital Group's mortgage- and asset-backed bond unit in New York, said in a telephone interview Wednesday.

The spread on Fannie's five-year debt above interest rate swaps climbed 17.5 basis points, to 80.5 basis points, continuing a jump from 37.4 basis points below that benchmark Oct. 13, two days before the government announced plans to guarantee bank debt.

Freddie's two-year debt yields above Treasuries rose 8.5 basis points, to 167.5 basis points.

GMAC is trying to join the growing list of potential sellers of debt that may carry more explicit guarantees from the Federal Deposit Insurance Corp. than Fannie and Freddie's securities. GMAC is the largest lender to General Motors car dealers.

"As a bank holding company, GMAC would obtain increased flexibility and stability to fulfill its core mission of providing automotive and mortgage financing to consumers and businesses," the company said Thursday. (See related story.)

This month General Electric Co. said the federal government had agreed to insure as much as $139 billion of debt for GE Capital Corp., its lending arm.

Lincoln National Corp., Aegon NV, Hartford Financial Services Group, and Genworth Financial Inc. have said that they may acquire small banks to gain access to capital from the government's $700 billion rescue fund.

In regulatory filings this month, Fannie and Freddie said higher long-term debt costs are making it more difficult for them to buy mortgages and related bonds to support the housing market and forcing them to rely more on short-term debt, raising their interest rate risks. The yields on 30-day agency debt were 37 basis points as of Thursday, according to Bloomberg data.

Spreads on the more than $4.2 trillion of mortgage-backed bonds guaranteed by Fannie and Freddie — a market the Treasury Department said it would support when the government seized them in September — rose Thursday for the fifth straight trading day.

The difference between yields on Fannie's current-coupon 30-year fixed-rate mortgage securities and 10-year Treasuries dropped about 6 basis points, to 220 basis points.

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