Fannie Mae Preferred S (FNMAS)

[jwnoble3]

Looks like the GSEs are positioning for the large payments to TSY, just when TSY needs it most. I really like that they are not selling assets to make the payment, instead using debt issuance!!!

http://www.bloomberg.com/news/2013-04-08/fannie-mae-profit-may-swell-treasury-coffers-as-debt-limit-looms.html?cmpid=yhoo

The government-controlled mortgage financiers, under revisions last year to their bailout agreements, turn almost all of their profits over to the Treasury. They each say they have considered reversing about $90 billion of writedowns of tax credits, which would boost the remittances

Fannie Mae signaled in its April 2 annual report it will realize $58.9 billion of the unusual gains in its first-quarter results, enough to fund Social Security payments for a month, according to Stone & McCarthy Research Associates’ Nancy Vanden Houten. After including Freddie Mac (FMCC)’s potential windfall and the $5 billion to $10 billion of regular income the analyst said they may post, their June payments could about equal the $100 billion by which former Treasury Secretary Timothy F. Geithner told Congress in December the U.S. debt grows on average each month.
“It could mean a pretty big chunk of cash for the Treasury at a time they need it,” said Vanden Houten, a senior government policy analyst at Princeton, New Jersey-based Stone & McCarthy. “I don’t have a strong feeling yet if we’re going to have a real nail-bitter of a debt-ceiling showdown, since I think there’s less appetite for it, but you can’t rule it out.”

Asset Sales
While Vanden Houten said the firms may use asset sales to come up with the money for any unusually large payments tied to the non-cash accounting gains, analysts at Deutsche Bank AG and FTN Financial say they probably will turn to the debt market, creating additions to their interest costs.
In January, Fannie Mae’s portfolio of liquid investments jumped by almost $28 billion, a sign it “may already have taken the first step toward raising longer debt for a Treasury payment,” Steven Abrahams, a New York-based Deutsche Bank analyst, wrote in an April 3 report.
Politicians may be in the middle of another debt ceiling fight when the money is sent over.
“Any time I’ve gotten too optimistic about these things being dealt with maturely, I end up having it blown back in my face,” Vanden Houten said.