Staff Working Papers

Working Paper 03-4: Market Discipline of Fannie Mae and Freddie Mac: How To Share Prices and Debt Yield Spreads Respond to New Information?

Author(s): ​Robert S. Seiler, Manager of Policy Research

Abstract: ​There has been little empirical research assessing market discipline of Fannie Mae and Freddie Mac. A first step is to investigate how Enterprise share prices and debt yields respond to new information. This paper does so by examining the share prices of Fannie Mae and Freddie Mac and the spreads between the yields of each Enterprise’s noncallable senior debt and the yields of comparable-maturity Treasury debt (senior debt yield spreads) during the period from February 2000 through mid-June 2003.