Freddie debt issue.

DJ Update: Freddie $3 Bln, 2-Yr Note Priced At Tsys +97.5 BPs

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(Updates with details on distribution) .

By Prabha Natarajan . Of DOW JONES NEWSWIRES .

NEW YORK (Dow Jones)--Freddie Mac (FRE) on Wednesday priced its new 3.125%, $3 billion, two-year reference note at slightly higher rates than initial talk as risk premiums weakened across the board in the secondary market.

The issue, launched Tuesday, sold at a yield of 3.229%, or 97.5 basis points over comparable Treasurys. It compares with a London Interbank Offered Rate below 7 basis points.

The initial price talk on the deal was 95.5 basis points over Treasurys, and its weaker pricing was attributed to wider risk premiums across the board. However, against Libor, it strengthened from the below 5 basis points talked of on Tuesday.

The previous Freddie two-year issue, 3.25% due 2010, was trading at 87.7/82.5 in the secondary market, according to TradeWeb.

More than half of the debt securities sold Wednesday were bought by American investors, while Asia chipped in for 34%, and Europe 11%.

Of this, foreign central banks bought 39%, at about their normal levels, and investment managers took the same share. Banks, on the other hand, bought only 4% of these securities.

The note, which is due Oct. 25, 2010, was offered through J.P. Morgan Chase, Lehman Brothers and UBS Investment Bank.

With this, Freddie has issued $43 billion in reference securities this year. .

The point is, sure they are issuing debt at 1% higher than treasuries, But the last issue was at 3.25 and this one is at 3.12. .... The point is there is greater demand this time than the last issue, which is why the rate went down.