Fannie Mae and Freddie Mac’s success in repaying US$223 billion in bonds due by the end of the quarter could determine whether they can avoid a federal bailout.
Fannie, based in Washington, has about US$120 billion in debt maturing through Sept. 30, while McLean, Virginia-based Freddie has US$103 billion, figures provided by the government-chartered companies and data compiled by Bloomberg showed.
Rising borrowing costs and evidence that demand for their debt was waning last month led US Treasury Secretary Henry Paulson to seek the authority to pump unlimited amounts of capital in Fannie and Freddie in an emergency.
Their interest costs are again increasing amid concern that credit losses are depleting the capital of the beleaguered mortgage-finance companies.
Rolling over the debt “is the single most important factor to their ability to remain liquid,” said Moshe Orenbuch, an analyst at Credit Suisse in New York. “So far, they’ve been able to do that.”
Investors in Asia, the biggest foreign owner of Fannie’s US$3 trillion in bonds, are reducing their share of purchases, potentially increasing the need for Paulson to make good on his pledge to backstop the companies.
“This whole backstop mechanism was set up so the actual need for it could be avoided,” said Mahesh Swaminathan, a mortgage strategist for Credit Suisse in New York. “The market is testing the Treasury’s resolve.”
The companies, responsible for 42 percent of the US home loan market, need as much as US$15 billion each in fresh capital to reserve against losses on mortgages and related securities that they either own or guarantee, said Paul Miller, an analyst with Friedman Billings Ramsey & Co in Arlington, Virginia.
The Treasury will probably be forced to buy as much as US$30 billion of preferred shares in both Fannie and Freddie by the end of next month, said Bill Gross, who manages the world’s biggest bond fund at Pacific Investment Management Co.
“Treasury is monitoring market developments vigilantly. We are focused on encouraging market stability, mortgage availability and protecting the taxpayers’ interests,” Treasury spokeswoman Jennifer Zuccarelli said.
Freddie Mac “continues to have strong access to the debt markets at attractive spreads,” spokeswoman Sharon McHale said.
Fannie spokesman Brian Faith declined to comment.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique