Paulson Plan Sweeps Fannie, Freddie Debt Tighter

A U.S. Treasury plan to freeze payments for subprime mortgage holders fired up demand for Frannie Mae and Freddie Mac mortgage and agency debt on Friday, as it assuaged fears of massive loan defaults and helped erase yield premiums racked up in the last week’s panic selling.

“The market was so pessimistic about the prospect of mortgage credit in general that good news of this magnitude was definitely a huge shot in the arm,” said Lance Pan, credit research director at Capital Advisors Group in Newton, Massachusetts.