The addition of five dealers to Fannie Mae's core group of dealers could cause bid/offer spreads to tighten due to the increased competition for the same amount of issuance. Fannie Mae recently announced the addition of five firms to its discount note core dealer group: Bear Stearns, Cantor Fitzgerald, Keybanc Capital Markets, Seattle-Northwest Securities Corp. and Wells Fargo Brokerage Services. Fannie Mae is expanding its dealer group to increase distribution of securities, according to Janis Smith, spokeswoman.
"I don't think it will affect [my company's] standing or position within this product at all," said a GSE market manager at one of Fannie Mae's core dealers. He speculated the reason Fannie has added these firms is to expand its regional reach.
However, the additions are causing some grumbling at other existing dealers. "From a distribution standpoint, does the bond market need another dealer? And why is Cantor Fitzgerald getting into agencies?" grumbled one government trader at one of the core dealers. The group includes Credit Suisse First Boston, Merrill Lynch and UBS. Calls to Cantor Fitzgerald were not returned by press time.
