Freddie Mac is maneuvering to attract a greater share of international investors by offering the first euro-denominated discount note program by a secondary mortgage market agency.

Freddie has started issuing short-term "euro commercial paper" to take advantage of demand in Europe for high-quality debt and build its reputation with European investors. SBC Warburg Dillon Read arranged the program and is the sole dealer.

The notes will be issued in several currencies, including the new euros, dollars, Swiss francs, marks, sterling, and yen, a spokesman for SBC said. The bonds can also settle to the Euroclear system, which European and Asian investors are familiar with.

"The coming of the euro is a great opportunity for U.S. issuers," said William T. Lloyd, director and head of market strategy and credit research for Barclays Capital. The euro will "represent a tremendous market" for many U.S. issuers that have good name recognition globally and can therefore "tap the entire market at once," he said.

Freddie Mac's first trades were conducted last week, with central banks in Europe and the Far East among the investors, the SBC spokesman said.

Foreign investors including central banks or liquid finance companies also have purchased Freddie Mac's callable debt, noncallable debt notes, and discount notes issued in the United States, a spokesman for Freddie Mac said.

Both European and Asian central banks will be adjusting their reserve currencies to accommodate euros. European central banks will be running down their reserves going into 1999 while Asian central banks will "be taking up the slack," the SBC spokesman said. During this period of readjustment, Freddie Mac's program "provides them with a high-quality credit instrument to invest their short-term funds in," he said.

Fannie Mae-the rival U.S. secondary mortgage market agency-is "not necessarily creating super-specific structures just for Europe," said Jon W. The Losen, vice president for debt marketing in Fannie Mae's treasurer's office. But, he added, "we are seeing European participation in the broad range of all of our debt products."

Out of $86 billion in debt issue in 1997, Fannie placed 29% internationally, including 13.5% in Europe, said Mr. The Losen.

Fannie Mae has issued $23.25 billion in its six benchmark noncallable debt notes brought to market, with 22% placed with European investors, 7% to non-Japanese Asian investors, 5% to Japanese investors, 4% to Middle East and other investors, and 62% to U.S. investors.

Mr. The Losen said that fund managers were Fannie's biggest debt buyers overall, but central banks and commercial banks are also active buyers of debt and particularly bullet and callable structures.

"We think that the euro will only be a success in tandem with a very liquid U.S. dollar market," Mr. The Losen said. Fannie Mae is continuing to try to enhance liquidity with U.S. dollar products, he added. "We'll look for opportunities to issue in the euro."

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