Flight from Fannie, Freddie may cloud US outlook

Official institutions' flight from US agency debt could hamper the effectiveness of Fannie Mae's and Freddie Mac's role in repairing the US mortgage market.

Central banks and other official institutions with accounts at the Federal Reserve have in the last fortnight pulled back their holdings of US Agency paper despite US Treasury Secretary Hank Paulson's explicit statement that the government would honour all the debt of Fannie Mae and Freddie Mac.

Paulson's explicit guarantee triggered a surge

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