Bonds

FHLBank bonds offer investors a wide variety of sizes, structures and maturities to meet numerous portfolio objectives. All earn the highest ratings from both Moody's and S&P (Aaa/AAA), and for domestic investors, all are exempt from state and local income tax. Investors and dealers can rely on the FHLBank System for continuous, innovative bond issuance, even during periods of market turmoil. In addition, customized debt products tailored for specific investors/markets are actively considered, subject to the System's funding requirements. Such flexibility is a key feature for buyers of FHLBank securities.

Bonds can be negotiated individually or auctioned competitively through a network of approximately 100 underwriters. So far in 2008, approximately 85% of sales were negotiated, with the remainder sold at auction. Bonds offered daily via auction include fixed-rate bullets (through the TAP Issue Program), and American-style callables.

The TAP Issue Program, launched in 1999, has achieved market-wide acceptance. By auctioning bullet bonds of standardized terms and maturities over a three-month period, individual issues can grow to multi-billion dollar size, enhancing their liquidity and utility. TAP Issues are highly sought by investors because of their Treasury-like attributes and their extra yield (25 to over 100 basis points). Also, by incrementally adding to these issues on a daily basis, the market disruption that sometimes accompanies large, lumpy issues is avoided.

In July 2000, the new Callable Bidding Group was announced. Once daily, American-style callable bonds can be auctioned to this group. It is expected that the standardization and consistency of small, market-clearing auctions will enhance the appeal of these triple-A rated instruments. In recent years, the FHLBanks have averaged about $30 billion in American callable sales annually through this program.

Structures and Terms
Bonds are available in maturities ranging from less than one year to 30 years, with the majority of issues between one and five years. Issue sizes can range from under $1 billion to $7 billion, and individual bonds can be reopened to meet additional demand. Because the FHLBank System runs a conservative matched-book of assets and liabilities, and is an active user of swaps to reduce risk, there is considerable flexibility with the structures and terms of issues brought to market. Bullets and fixed-rate callables predominate, but the System can effectively issue floaters, step-ups/downs, zeros, and others. Minimum denominations range from $10,000 to $500,000 or more, depending on complexity and associated risk. Real-time data on bonds offered at auction can be found in the Securities Issuance section of this web site, on Bloomberg, Tradeweb, and other financial news services. Details on negotiated bonds can be found in the New Issues section.

Purchase
Underwriters may contact the Office of the Finance if there is a structure/dollar target they need to meet investor demand, although many times they negotiate directly with the regional FHLBanks. In either case, dealers receive rapid response to their inquiries, as well as fast execution. Competitively bid transactions are generally initiated by an FHLBank funding need of a particular structure and size. Dealers are invited to bid and the trade is executed, usually within 30 minutes.

Settlement and Delivery
Bonds come with a variety of settlement options. When issued in the U.S., bonds are transferred through the Fedwire in book-entry form. Bonds issued under the Global Debt Program (GDP) may be delivered through the Fedwire, Euroclear, Clearstream and/or DTC.

Disclosure
Bond offerings are subject to the FHLBank Offering Circular for Consolidated Bonds and Consolidated Discount Notes dated January 1, 2001 and as supplemented from time to time. Bonds are also subject to the terms and conditions as specified in the Offering Notice for the specific issue. The dealer should provide these documents to investors prior to or at settlement. They can be obtained through the is also posted in real-time in the Details & Documentations section of this web site, and are posted on Bloomberg as well.