Last month Freddie Mac did something that solid, dependable US agencies are not supposed to do: it took a gamble. It announced that it would start borrowing large amounts in euros.
The agency will issue what it calls eReference Notes, bringing to the euro sector the trend towards government-style borrowing programmes by frequent issuers which has swept the dollar market in the past three years.
It's a gamble because the euro market is neither as deep nor as liquid as the dollar sector. Freddie's European counterparts - triple-A-rated borrowers such as the European Investment Bank (EIB) and Kreditanstalt für Wiederaufbau (KfW) - have to pay more to borrow in euros than the US agencies do to fund in dollars. And Freddie will face the added cost of swapping euro proceeds back into its home currency.
Given prevailing swap prices and the spreads of comparable issuers, Paul Hearn, head of European debt capital markets at JP Morgan reckons it would cost Freddie Mac seven or eight basis points more to fund itself in euros than in dollars. That's a huge amount of money for a price-sensitive borrower.
Freddie's hope is that massively liquid euro bonds will cause that price difference to vanish.