Across the Curve

Freddie Mac

I did not pick this up yesterday but it is worth mentioning. Freddie sold 3 month bills and 6 month bills yesterday and stock jockeys allegedly took that as a reason to rally the stock.

First of all it was only$1 billion of each. That is a piddling amount and in a normal time would clean up without notice. Substantial bids from money funds or some municipality could clear that easily. So it is not something to be lauded or celebrated. In fact the inordinate attention paid to the result just highlights howweak the crdit actually is as if the credit was robust ,there would be nothing to discuss.

There is also a pricing issue on each of the auctions. The three month bill priced at T+ 90 and Libor – 23.  The previous sale of bills priced at T+61 and Libor -31.

The six month bill priced at T+ 92 and Libor -25 1/2. The previous issue priced at T+ 80 and Libor- 32.

So you can observe that on a spread basis the funding levels actually worsened.