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Mortgage giants up on debt sale | Mortgage giants up on debt sale |
(about 1 hour later) | |
Shares in US mortgage finance giants Freddie Mac and Fannie Mae rose after Freddie Mac sold around $2bn (£1bn) of short-term debt. | Shares in US mortgage finance giants Freddie Mac and Fannie Mae rose after Freddie Mac sold around $2bn (£1bn) of short-term debt. |
The move boosted confidence in the mortgage giants sending Freddie Mac stock up 17% and Fannie Mae up 3.8%. | |
Both lenders' shares have fallen recently on fears that they could go bankrupt as borrowers default on loans. | Both lenders' shares have fallen recently on fears that they could go bankrupt as borrowers default on loans. |
Combined Freddie Mac and Fannie Mae guarantee around half of the mortgages offered in the US. | Combined Freddie Mac and Fannie Mae guarantee around half of the mortgages offered in the US. |
Rajiv Setia, an strategist with Barclays Capital said after the sale: "Government Sponsored Enterprises (GSE) continue to have access to funding." | Rajiv Setia, an strategist with Barclays Capital said after the sale: "Government Sponsored Enterprises (GSE) continue to have access to funding." |
The successful sale on Monday was greeted positively by Wall Street, with analysts saying it showed confidence - at least short terms - in the lenders. | The successful sale on Monday was greeted positively by Wall Street, with analysts saying it showed confidence - at least short terms - in the lenders. |
"We are not convinced that [the government] needs to take take any action over the near term," said Citigroup analyst Bradley Ball. | "We are not convinced that [the government] needs to take take any action over the near term," said Citigroup analyst Bradley Ball. |
Freddie Mac and Fannie Mae are a key part of the US mortgage market. | Freddie Mac and Fannie Mae are a key part of the US mortgage market. |
As mortgage guarantors, they must pay out when homeowners default on their loans. | As mortgage guarantors, they must pay out when homeowners default on their loans. |
But in light of the weakening US housing market, their finances have been highly strained by rising defaults and falling house prices. | But in light of the weakening US housing market, their finances have been highly strained by rising defaults and falling house prices. |
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