Riskier Fannie Bonds Are Devoured
The latest place where investors are taking on more risk in exchange for apparently meager returns: the U.S. housing market.</br></br>Bond buyers on Tuesday jockeyed to get a piece of $1.6 billion of riskier Fannie Mae securities, enabling the government-backed mortgage company to twice cut the yields it offered on the debt.</br></br>The offering is Fannie's third sale of so-called risk-sharing certificates that enlist investors to pay for potential defaults on the home loans Fannie guarantees. The riskiest of the securities, linked to loans to home purchasers who paid as little as 3% cash upfront, drew 19 times the bids necessary to complete the sale before yields were cut, said people familiar with the offering.</br></br>The sale of the debt, called Connecticut Avenue Securities after the location of one of the Washington company's offices, is expected to be completed on Wednesday, according to the people.</br></br>Robust investor demand for the deal is the latest sign of investors' willingness to take on more risk in return for higher income amid soft economic growth and low interest rates on safe investments.