Freddie Mac is signaling larger issuances are ahead for its reference note program with an unusual five-year offering, which is intended to prepare the market for larger issue sizes in the future, according to John Radwanski, assistant treasurer and v.p. of debt funding. "Going forward our average size will be larger than the [$3 billion] minimum," he said, declining to speculate how large.
As for the five-year offering, the government-sponsored enterprise is accepting up to $3 billion in outstanding reference notes in exchange for the new five-year, boosting the new issuance to up to $6 billion. Freddie Mac is pursuing larger reference note sizes after dealers and investors voiced concerns over liquidity, with issues increasingly subject to squeezes (BW, 4/11). The mortgage giant decided to not issue a large cash note to avoid surprising the market and disrupting prices in the secondary market, Radwanski said.
Freddie Mac has issued at the minimum size for all but one of the previous reference notes this year. The five-year is the first time since 2002 Freddie Mac has issued a note via an exchange offering.
