Fannie & Freddie sub recovery bigger than senior

From Reuters, initial indications for today's auction:

	Fannie	Freddie
Senior	92.4%	93.75%
Sub	92.65%	93.8%

Remember, kids, while senior unsecured recovery can't be lower than sub in the actual bankruptcy hearings, it surely can in a CDS auction.

Update. Final results in:

	Fannie	Freddie
Senior	91.51%	94%
Sub	99.9%	98%

Alea suggests that the recovery mismatch is due to a cheapest to deliver effect as the zeros are deliverable into the senior swaps (list of deliverables here). Personally I think it is partly because there is a lot more liquidity on the sub than the senior. In particular naked shorts played with the sub (partly to hedge nationalisation risk). A lot of those are short covering now, whereas the senior was typically a credit risk management trade rather than speculation.