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Money funds buy most of Fannie Mae SOFR bond issue

NEW YORK, Jan 28 (Reuters) - U.S. money market funds on Monday bought most of a $2 billion Fannie Mae floating-rate debt offering referenced against the Secured Overnight Financing Rate (SOFR), the U.S. mortgage finance agency said.

Fannie Mae and other companies have been issuing more floating-rate bonds that are benchmarked against SOFR, which is an alternative to the London interbank offered rate (LIBOR).

LIBOR, tarnished by rigging scandals, is expected to be phased out in 2021.

"It is important to maintain momentum in the SOFR market, and Fannie Mae is proud to demonstrate commitment to the Alternative Reference Rate Committee’s (ARRC) efforts to develop LIBOR-alternatives," Fannie Mae Treasurer Nadine Bates said in a statement.

Money funds, which are regulated by the Securities and Exchange Commission, bought 83.2 percent of the 18-month bond issue.

Fund managers purchased 9.7 percent of Fannie Mae's latest SOFR offering.

Commercial banks, insurance companies, and state and local governments bought the rest of the issue, which was priced at a spread of 6 basis point over SOFR, Fannie Mae said.

Barclays Capital Inc., Citigroup Global Markets Inc., and Nomura Securities International, Inc. were the lead underwriters of the Fannie Mae SOFR transaction. CastleOak Securities and Mischler Financial Group were part of the selling group. (Reporting by Richard Leong Editing by Sonya Hepinstall)