In a report released today on Fannie-Freddie auctions, Citi highlights as 'controversial' the 'wide interpretation of what constituted deliverable assets' - in particular the inclusion of range accruals and zero coupon structured notes. Citi examines the counterintuitive result of a high-settlement subordinated paper, as well as a higher-than-expected ‘final price’ due to more buyers than sellers turning up.

Ultimately, Fannie Mae senior and subordinated ended at 91.51 and 99.99, respectively, and Freddie Mac senior and sub at 94 and 98, respectively. Both subordinated credit default swap buyers were disappointed, where Fannie Mae contracts became virtually worthless and Freddie Mac's settling at a final price of 98.