+++ EuroWeek Exclusive +++
Freddie to launch three year euro note within week
Freddie Mac plans to launch its latest EuReference Note issue, a Eu5bn three year transaction via BNP Paribas, Lehman Brothers and Merrill Lynch, within the next week, Louise Herrle, the US agency's treasurer told EuroWeek yesterday (Wednesday).
KfW is due to start roadshowing its new benchmark programme on March 1, meaning that Freddie Mac will want to price before then. The exact timing has not yet been finalised, Herrle said.
Freddie Mac often prices its Reference Note issues mid-morning New York time, early in the week, though it occasionally varies this format to target investors in different time zones. A final announcement could emerge before the weekend.
Freddie Mac is likely to have a selling group of European banks for this issue, and has held discussions with regional banks. The US agency wants to attract another tier of investors to its existing European customer base.
"When you launch a programme, everyone looks at the big accounts," said Herrle. "We want to add a second and a third tier. It may take time.
"We are gaining name recognition, but even among the first tier investors we are not getting everyone. There are still people sitting on the sidelines."
The agency is clearly becoming more comfortable with its EuReference Note programme, and it now sees KfW's entry into the market as a vindication of its strategy. "We are less nervous than we were with the second issue," said Herrle.
The latest deal will be the third of the four quarterly euro benchmarks that Freddie Mac committed itself to last August, and Herrle expects to announce a further calendar in the next few months.
Freddie Mac does not expect to achieve the funding levels in euros that it does in dollars but, said Herrle, the programme has other functions besides purely hitting funding targets. It diversifies Freddie Mac's funding sources, and facilitates its hedging strategy.
"They are definitely separate markets," she said. "We benefit in the US as people reward us for liquidity. The European investor is at a different stage in analysing securities. We do not see the same liquidity premium."
So far, 200 new investors have come to Freddie Mac debt through the EuReference Note programme. Herrle said that Scandinavian and UK accounts had been particularly receptive to the programme, but that the core European markets of France, Germany and Italy are still underrepresented.