Freddie Mac sold $2 billion in short-term debt

This could be promising news for investors of U.S. mortgage finance companies Freddie Mac and Fannie Mae, $2 billion of Freddie Macs short term debt was sold on Monday, this could reassure investors that both mortgage giants can survive without a government bailout.

The news affected the stock value with Freddie Mac stock increasing by 17 percent and Fannie Mae Shares increased by 3.8 percent.

Fannie Mae and Freddie Mac must regularly issue debt to refinance maturing issues that fund their combined $1.5 trillion in mortgage investments. On Monday Freddie Mac sold $1 billion each in three- and six-month bills, with bids better than its sale earlier this month.

Fannie Mae is also set to follow suit with the sale of $2 billion in bills this Wednesday.

Due to the mandate in July from congress, investors are worried that if mortgage defaults increase and grind down the two companies the U.S. Treasury could be forced to intervene by buying debt or stock on the companies, this in turn would dilute the existing stock value.

Source: reuters

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