“This will help Fannie Mae support mortgage demand and enable international investors to execute transactions during their domestic trading hours and in a currency of their choice,” said Franklin Raines, Fannie Mae’s chief executive. Raines said he expects demand for mortgage capital to double over the decade. “We expect 30 million more people in the US and 1.6 million new homes.”
Fannie Mae chose a select group of dealers to make markets in the new products: Citigroup, CSFB, Deutsche Bank, Goldman Sachs, JP Morgan and Lehman Brothers. At the close of business on each business day in Washington, where Fannie Mae is headquartered, the company will post terms for the next day's trading to the dealer group. This will include the amount of notes to be issued, eligible currencies, a series of maturity dates and US dollar funding spreads.
Linda Knight, Fannie Mae’s treasurer, said: “While there are several issuers capable of maintaining large liquid issuance, Fannie Mae’s entrance into this market should satisfy investors’ appetite for securities capable of being issued in large size and customised to the maturity date and in the currency of their choosing.”
Knight said Fannie Mae will swap foreign currency borrowings into US dollars, but at no time will it have foreign currency exposures. “The dealer assumes responsibility for swapping out of the position,” she said.
The week on Risk.net, December 2–8, 2016Receive this by email