John Carney at Dealbreaker — one of my favorite financial writers out there — had an interesting take on Freddie’s successful debt sale Monday. HW reported on the sale’s stronger-than-expected response from investors as a net positive for the beleaguered GSE, which it was. But why demand was so strong may involve something a little less obvious, Carney opines. In short, we might have been looking at leveraged purchases of Freddie debt that could be flipped to the Fed for nearly-guaranteed profit:

Here’s how it works. A bank that bought the six month notes from Freddie this morning could also bid to borrow from the Fed’s Term Facility, which held an $75 billion auction today. As collateral for the borrowing, the bank could offer the newly purchased Freddie notes, for which the Fed would give them credit for 97% of their market value. Recently, the TAF pricing topped out at 2.35 percent for 28-day borrowing. So a bank buying $100 million of Freddie paper yielding 2.858% could flip it to the Fed, borrowing $97 million at around 2.4% (assuming the pricing will be slightly higher this time around). At the end of the day, a credit desk could buy $100 million of Freddie debt for just $3 million down. On that $3 million, the desk would receive a 17.7% annualized return, or 8.8% over six months, for paper that is this close to being explicitly backed by the Treasury Department. Not a bad deal at all.

Certainly thought provoking.