Fannie and Freddie boosted by bonds investor news

15 July 2008

The US treasury's pledge to lend unlimited funds to government-sponsored mortgage lenders Fannie Mae and Freddie Mac has led to an upswing in the firms' market performance.

Two major bond investors, Vanguard Group and Federated Investors, have indicated that they will continue to buy up debt from the lenders, Bloomberg reports.

However, the firms received less positive news from the stock exchanges, with Fannie Mae falling 5.1 per cent and Freddie Mac dropping 8.3 per cent.

This brings their yearly drop in share value to 76 per cent and 79 per cent respectively.

The moves follow treasury secretary Henry Paulson's comments that the government intends to lend money and buy stock in the lenders if required.

This followed a week of poor market performance from Fannie Mae and Freddie Mac, who have faced speculation that they are struggling to raise revenue due to the credit crisis and falls in house prices.

Speaking to the news agency, Friedman Billings analyst Paul Miller said: "There is a lack of confidence in Fannie and Freddie stock right now."

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