The issue scored points on several counts: it pulled new investors into sterling as well as new investors into Fannie Mae; it revealed a market for high-liquidity sterling issues to supply institutional investors; it brought many UK institutions, which traditionally invest in longer maturities, down to five years; and it exposed the global depth of the sterling market.
Fannie Mae (the Federal National Mortgage Association) acts as a lender of last resort to the US property market through its guarantees on mortgage-backed securities. A US federal agency, it has an implied government guarantee and a triple-A rating. Its bonds must be registered, so it may only raise money on the bond markets via global and targeted issues.
"Since a global debt facility was established in January 1995, Fannie Mae has looked at all currencies as possibilities," says Fannie Mae treasurer Linda Knight.
Yet, according to Paul Richards, director of global client products on the European syndicate at Merrill Lynch (joint lead managers with BZW): "When we approached Fannie Mae last year, no-one else had discussed global sterling with them and they had not considered a global sterling bond."