'Since Fannie Mae began issuing Benchmark Notes two years ago, our total focus has been on increasing investor liquidity,' said Linda K. Knight, Senior Vice President and Treasurer for Fannie Mae. 'We are confident that the important new CME products that start trading today will serve to enhance the liquidity that is the cornerstone of Benchmark Notes.' Freddie Mac President and Chief Operating Officer, David W. Glenn stated, 'The liquidity and distribution of the Reference Note market is growing, and the timing is ideal for the launch of a successful futures contract at the Chicago Mercantile Exchange. We are very enthusiastic about the added liquidity for Freddie Mac debt security investors and all capital market participants that these new contracts will provide.'
'The continuing evolution of U.S. debt markets means the non-callable debt instruments of Freddie Mac and Fannie Mae are playing an evermore vital role in global fixed income markets,' said CME Chairman Scott Gordon. 'The CME's new agency note futures contracts - an outgrowth of this expanding role - will allow financial managers greater flexibility in managing their portfolios.'
CME President and Chief Executive Officer Jim McNulty said, 'The CME is the natural home for these products as the price correlation between agency debt and the CME's Eurodollar contracts is stronger than between any other two fixed-income sectors. We have worked closely for months with dealers in agency notes as well as Fannie Mae and Freddie Mac to specifically tailor our agency note futures contracts to directly meet the needs of the investors in their instruments.'
The new 5- and 10-year agency note futures contracts are sized at $100,000 and listed with quarterly expirations. The contracts will be settled through physical delivery of eligible securities of either Freddie Mac or Fannie Mae, both of which are AAA-rated. CME agency note futures bear a notional coupon of 6.5 percent and have a minimum price movement of one-half of 1/32nd of 1 percent of par value, or $15.625 per tick.
The contracts will trade via open outcry during Regular Trading Hours of 7:20 a.m. to 2 p.m. Central Time. The contract will also begin trading via the CME's GLOBEX?2 electronic trading system on Sunday, March 19, at 5:30 p.m. and will trade electronically throughout the week from 2:10 p.m. to 7:05 a.m. the following day.
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of home ownership and rental housing. Freddie Mac purchases mortgages from lenders and packages them into securities that are sold to investors. Over the years, Freddie Mac has opened doors for one in six homebuyers and two million renters across America.
Fannie Mae is a New York Stock Exchange company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation's largest source of financing for home mortgages.
