Amortizing Prepayment Linked Securities (APLS)

The FHLBanks are well known for flexibility and responsiveness in debt issuance. Over 80% of bond issuance is negotiated, demonstrating how the FHLBanks are able to successfully provide the debt structures demanded by investors worldwide.

Amortizing Prepayment Linked Securities (APLS) are the latest example. In response to inquiries from underwriters, investors, and a number of FHLBanks, APLS were created to fill the need for a new synthetic mortgage investment, while providing a new funding vehicle for the FHLBanks.

Overview of APLS

• Debt obligation of the FHLBanks
• A portion of principal subject to retirement monthly, based on prepayment of a reference pool of mortgage securities
• Mortgage-like security with limited extension risk due to shorter final maturity
• Convexity profile is less negative than that of underlying reference pools
• Convexity profile can be tailored by varying the coupon, maturity date, and/or reference pools
• Offers name diversity in the mortgage market

APLS can be issued in a wide variety of sizes and maturities to meet numerous portfolio objectives. Like all FHLBank consolidated obligations, APLS carry the highest ratings from both Moody's and S&P (Aaa/AAA). This is due in part to the inherent financial strength of the FHLBank System, its links to the U.S. Government, and because payment of interest and principle is the joint and several obligation of all Federal Home Loan Banks. Investors and dealers can continue to rely on the FHLBank System for continuous, innovative bond issuance during all economic cycles. Like all FHLBank consolidated obligations, APLS are not obligations of the United States and are not guaranteed by the United States.

Please feel free to review the list of currently outstanding APLS on Bloomberg.
Type "APLS" and GO to obtain the Cusip, outstanding par, maturity, and information on the reference pools.