To meet investor demand and close out its yield curve, Freddie Mac last week issued a 30-year reference bond, marking the first time the company has issued this type of bond.
The $2 billion reference bond was priced Nov. 18 with a coupon of 6.75% and an issue price of 99.025 to yield 6.828%, or 69 basis points over the on-the-run Treasury bond. Settlement was Nov. 22, and maturity will be Sept. 15, 2029.
The sale was joint lead-managed by Credit Suisse First Boston Corp., Lehman Brothers Inc. and Salomon Smith Barney, and was also offered by a group of six co-lead managers and a selling group.
Freddie Mac issued these bonds to answer the calls of many of its investors. "They felt that it was a great product and we saw an opportunity last week to price the product," said Douglas Robinson, spokesman for Freddie Mac. "It met very strong investor demand." He added that Freddie Mac had already issued two-, three-, five-, and 10-year reference securities, and with the issuance of the 30-year note, "the yield curve is complete."
The issuance of the 30-year note comes on the heels of the recent announcement of Freddie Mac's reference bills program, which Robinson said, "further solidified Freddie Mac reference securities as an alternative to Treasury securities. Those investors are looking for some additional yield, and excellent liquidity and global sponsorship."
The company also issued a calendar for future reference note sales, giving investors the option to use securities other than "to invest in them and hold them," said Robinson.
"They now can use them as part of their financing program: term repo market, overnight repo. It's just a much more flexible tool now, with the calendar, with the full yield curve, and it was met with widespread great support and acceptance."
He added that the reference program has global appeal, with a strong interest in Freddie Mac products by foreign investors, because of Freddie Mac's clear calendar, transparent pricing, and a strong dealer network to support the bonds.
While there will not be another 30-year note issued this year, Freddie Mac does intend to reopen a 10-year reference note in December. The 6 5/8% reference note will be due Sept. 15, 2009.