Freddie Mac Sells Off Bills At Higher Than Market Rates

By Marc Castro

Jun 10, 2013 01:15 PM EDT

The second largest home funding company, Freddie Mac, announced last Monday that it had sold nearly US$3 billion in reference bills at higher than usual rates. This was a surprise development in light of the current weak demand in the market for similar maturities and comparable amounts.

Freddie Mac had sold off US$1.5 billion in three month bills that would fall due on Sept 9, 2013 with a rate of 0.069%. This is a slight increase from the previous three month bills sold off last May 13. In the same transaction, the company was able to sell off US$1.5 billion of six month bills that would fall due on Dec 9, 2013 at a rate of 0.100%. This is higher than the 0,098% rate for the same bills sold off last May 13.

While demand for the three month instruments were lower as it only registered a 4.49 bid to cover ratio. This was low compared to the 4.93 ratio for the same bills auctioned off last May 13. This was also the same with the six month bills, with 4.48 as against the 5.03 from the batch sold last May 13.

The settlement is scheduled to be done on June 11. The bid to cover ratio is a reflection of the number and amount of bids compared to the number and ammount of offers made on the instruments. A lower ratio means that demand was weaker. 

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