Fannie Mae, the nation’s biggest mortgage buyer, made history with an $11.5 billion bond sale Wednesday. It was the largest dollar-denominated, one-day bond sale ever in the US outside of the Treasury market. (In June, Deutsch Telekom did $14 billion, including 9.5 billion in US$ and $4.5 billion in other currencies.)

The sale suggests not only that the bond markets are healthy again, but also that the quasi-government agency is succeeding in its efforts to become a benchmark security in those markets.

This sale was made despite increasing scrutiny from politicians and banks that say the government-sponsored Fannie Mae and Freddie Mac have advantages that let them unfairly compete with private businesses. Other critics say the growth of these agencies could put their investors at risk, and call for new limits on them. Rep. Richard Baker, a Louisiana Republican, introduced a bill that would give Fannie Mae a new regulator and prevent it from borrowing directly from the Treasury, a move that would weaken Fannie’s credit quality in the bond markets.

Although the political pressure has lessened since spring, Fannie Mae still had to pay better terms to lure investors. “It’s a quarter point more than before the Baker bill,” says Arthur Frank, director of fixed income research at Nomura Securities International Inc. in New York. Fannie Mae began with a spread of about 80 points over the 10-year Treasury bonds at the end of February. This widened to 124 basis points in mid-May, before closing the deal this week with a spread of 106.5 basis points.

The agency has also changed the way it has been selling its bonds since the early 1998. Instead of buying mortgages from lenders then repackaging the debt as bonds in small increments with irregular timing, it has tried to float larger bonds at regular intervals, to help investors plan.

“It was based on feedback urging us to organize issuance into larger and more liquid vehicles in a predictable manner,” said John The Losen, Fannie Mae’s vice president for debt marketing.

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