Last week's huge, unscheduled Freddie Mac sale of agency bullets shocked traders with its size and proximity on the yield curve to the Federal Home Loan Banks' two-year global bond that was priced the same day. The $3 billion Freddie Mac February '07 bond came on top of the FHLBs' scheduled $4 billion June '07 bond, cheapening up both issuances with the extra supply. Freddie Mac's off-calendar bullets have generally only gone up to $1-1.5 billion, according to an agency strategist. "It's not good for Freddie Mac, it's not good for Home Loan and it goes against the common courtesy and etiquette of the market," one senior agency trader griped.
Other agency traders saw the move as a straightforward league-table play by the underwriters. "[The leads – Banc of America Securities, Deutsche Bank and Merrill Lynch] are hoping they'll make up the loss [for selling into a congested market] with the next global bond," another agency trader said. But even as a league-table play, the sale is noteworthy for coming at the beginning of the month rather than the end to bolster league standings, the strategist noted. Dan Markaity, manager of global public credit at Merrill, and Pat Coleman, head of the agency and sovereign business at BofA, did not return calls by press time. Jeanmarie Genirs, head of agency debt at Deutsche Bank, declined comment.
