Fannie Mae has priced $1.5 billion of 5.125% 10-year Subordinated Benchmark Notes at 99.180.The issue (CUSIP 31359MTP8), due Jan. 2, 2014, yields 5.231% at a spread of 92 basis points over the 4.250% Treasury due in August 2013. The settlement date is Nov. 6. The joint lead managers are Lehman Brothers Inc., Merrill Lynch & Co. Inc. and Morgan Stanley & Co. Subordinated Benchmark Notes differ from other types of subordinated debt in that they contain triggers for the deferral of interest payments, Fannie Mae said. Interest can be deferred for up to five years if Fannie Mae's core capital: falls below 125% of its critical capital requirement; or falls below its minimum capital requirement and, at the company's request, the secretary of the Treasury purchases the company's debt obligations.

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