Debt Spreads Between GSEs and Other Corporations

Debt Spreads Between GSEs and Other Corporations Policy analysis of the housing GSEs—Freddie Mac, Fannie Mae, and the Federal Home Loan Bank System—has largely centered on a comparison of their cost advantages relative to the benefits they provide to consumers and the market. Researchers generally treat their lower funding costs as the largest component of their cost advantage and measure it by a comparison of spreads between yields on non-GSE securities and GSE securities. This paper provides the first econometric analysis of such spreads. Special components of this research are separate analysis of debentures and medium-term notes, a comparison with all financial firms and a banking subsample, and the introduction of liquidity proxies. Comparing Freddie Mac and Fannie Mae debt with non-GSE debt rated AA− gives an estimated range of 27 to 30 basis points without the inclusion of the liquidity proxies, and a range of 22 to 27 basis points with their inclusion, over 1995–2000. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Debt Spreads Between GSEs and Other Corporations

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1023/A:1016521624676
Publisher site
See Article on Publisher Site

Abstract

Policy analysis of the housing GSEs—Freddie Mac, Fannie Mae, and the Federal Home Loan Bank System—has largely centered on a comparison of their cost advantages relative to the benefits they provide to consumers and the market. Researchers generally treat their lower funding costs as the largest component of their cost advantage and measure it by a comparison of spreads between yields on non-GSE securities and GSE securities. This paper provides the first econometric analysis of such spreads. Special components of this research are separate analysis of debentures and medium-term notes, a comparison with all financial firms and a banking subsample, and the introduction of liquidity proxies. Comparing Freddie Mac and Fannie Mae debt with non-GSE debt rated AA− gives an estimated range of 27 to 30 basis points without the inclusion of the liquidity proxies, and a range of 22 to 27 basis points with their inclusion, over 1995–2000.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Oct 18, 2004

References

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