SOFR Transaction Attracts Broad Investor Demand

WASHINGTON, DC – Fannie Mae priced its second issuance of Secured Overnight Financing Rate (SOFR) securities, issuing $2 billion of 6-month, $1.5 billion of 12-month, and $1.5 billion of 18-month floating-rate corporate debt. Building on its first SOFR issuance in July 2018, Fannie Mae leads the market in the development of SOFR as a key market index in support of the Alternative Reference Rate Committee’s (ARRC) efforts.

Fannie Mae’s second transaction was designed to provide additional points on the SOFR curve and serve as a benchmark for market participants.

“By combining our first issuance that has now rolled down the curve, the market has the benefit of six maturity points,” said Nadine Bates, Senior Vice President and Treasurer, Fannie Mae. “The total orders exceeded $18 billion from a broad array of investors, attesting to the market’s increased readiness and acceptance of SOFR.”

Following Fannie Mae’s initial transaction in July, there has been significant momentum in the SOFR market for floating-rate securities, including S&P’s confirmation of SOFR as an anchor rate for S&P-rated money market funds; the Federal Reserve’s announcement that enables issuers to shorten the lockout period ahead of coupon payments for some floating-rate securities to two days; and additional SOFR transactions from a variety of issuers.

“It is important that we find ways to promote the use of SOFR because the risks to LIBOR are, at this stage, quite considerable,” said Federal Reserve Vice Chairman for Supervision Randal K. Quarles. “We welcome Fannie Mae’s continued leadership in helping to establish regular use of SOFR in financial markets.”

“The market for SOFR issuances continues to drive forward, and today’s announcement is further validation of the rate as a benchmark alternative. Fannie Mae was a pioneer in issuing the market’s first-ever SOFR securities and their leadership continues with this second issuance,” said Sandie O’Connor, Chair of the Alternative Reference Rate Committee and Chief Regulatory Affairs Officer, JPMorgan Chase. “Additionally, the underwriting role undertaken by JPM, TD, and Nomura for this issuance reflects a collectively strong commitment toward broader SOFR use and adoption.”

6-month3135G0U50$2.0BSOFR + 4 bps
12-month3135G0U68$1.5BSOFR + 7 bps
18-month3135G0U76$1.5BSOFR + 10 bps

Investor Distribution

SOFR - Secured Overnight Financing Rate Security Investor Distribution October 2018

J.P. Morgan, Nomura Securities International, Inc., and TD Securities USA are the lead managers on this transaction. Academy Securities and CastleOak Securities are selling group members.

Related Link
Fannie Mae Pioneers Market’s First-Ever Secured Overnight Financing Rate (SOFR) Securities

Aleksandrs Rozens