Freddie Mac is planning to scale back its issuance of euro-denominated debt. The mortgage giant will not sell any more euro-denominated debt for the remainder of this year and has no plans to issue such debt next year, according to John Radwanski, assistant treasurer and v.p. of debt financing. The scaling back of Freddie’s European efforts for next year come as it has sold much less debt this year than it planned. Freddie had said it would issue €10-15 billion in debt this year but has only sold €7 billion. Michael Cosgrove, Freddie spokesman, said lowered funding needs, market conditions and lowered demand affected the volumes. He declined to be more specific about demand.
In addition, the company plans to make all issuance dates on next year’s funding calendar optional—a sharp change from the current practice of setting a fixed issuance calendar each year. Overall, Freddie’s funding needs will be lower since the company’s projected portfolio growth is expected to slow from 13.8% last year to a rate “comparable to the mortgage market’s growth” of 8 to 10% over the next few years, Radwanski said. He declined to speculate on what Freddie’s total issuance will be but did say the company will have to issue at least $90 billion just to replace notes maturing next year.
The new quarterly funding announcement will be published one month before the quarter begins, to give investors at least some advance notice, instead of the current practice of publishing on the first day of the quarter.
“Now you’re looking at only having perfect clarity much closer to the time of auction,” said Jim Rhodes, agency strategist at ABN AMRO, referring to the calendar change. The uncertainty creates a technical wildcard for agency debt. “Even if you can predict where rates, the economy and the Federal Reserve are going, and can calculate the relative value of mortgages to agencies, then you still don’t know what the total issuance will be,” Rhodes said.
