In an uncertain and volatile market, Fannie Mae ought to be an obvious choice for best borrower. Investors do not seem to be on the desperate hunt for yield that dominated their decisions two years ago. Now they hunt the right credit, and increasingly that means looking for a credit with liquidity. With annual funding needs in the hundreds of billions of dollars, Fannie Mae should be providing that.
And it is. The US mortgage agency now has a full yield curve stretching out from two years to 30 years, has started to see other borrowers price deals off its deals, and has even been touted as a replacement benchmark for US treasury bonds as fewer are issued and more redeemed. Fannie Mae is playing down this latter role people have ascribed to it. Partly out of diplomacy as legislators on Capitol Hill scrutinize the role the agencies play in the markets, and the role government sponsorship has on the agencies, and partly out of an institutional conservatism.
But investors want more than just liquidity from borrowers. They want the liquidity to be accompanied by increased transparency and predictability. Or to put it another way, says the head of debt capital markets at one of the major underwriters: "Keep it simple, stupid!"
Any issuers sticking to the method of the mid- to late-1990s of lots of public deals with bells and whistles, and a plethora of private placements through the MTN market, might have found the past 18 months rather tough.