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Fannie Mae and Freddie Mac fell after Bank of China Ltd., the nation's third-largest bank, said it pared its holdings of the mortgage-finance companies' debt as they faced growing losses and the potential need for a US government bailout.

Fannie ended a six-day, 81% rally, falling $US1.11, or 14%, to $US6.84 in New York Stock Exchange composite trading. Freddie, which jumped 88% in the four days ended yesterday, dropped 77 cents to $US4.51. Both are still down by more than 80% year-to-date.

Bank of China's portfolio of the companies' debt was reduced by 29% in the past two months, by about $US3.14 billion to $US7.5 billion as of August 25, the Beijing-based bank said in an earnings report. Holdings of mortgage-backed bonds guaranteed by Fannie and Freddie were cut by 22% to $US5.17 billion, the bank said, without elaborating on the paring.

Overseas investors are ``pulling back because they're worried about the credit,'' Loomis Sayles & Co. Vice Chairma...

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