Fannie Mae Debt Issuance1
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FUNDINGNOTES For Fannie Mae’s Investors and Dealers
March 2007
Fannie Mae’s Issuance of Non-Dollar Denominated Debt Securities
Foreign Currency Denominated Notes
Figure 1 Fannie Mae’s U.S. dollar-based LIBOR spreads versus a hypothetical issue in euros 25 20 15 10 (basis points)
Fannie Mae strives to remain flexible in responding to investor demand for its debt securities and maintain a broad investor base. One example of this flexibility is Fannie Mae’s ability to issue short- and long-term debt securities in various currencies. FX Discount Notes and Foreign Currency Denominated Notes allow investors to purchase high credit quality debt securities in the currency of their choice with the possibility of obtaining a yield spread over their local government debt. In this edition of FundingNotes, we will discuss the issuance and settlement processes for Fannie Mae’s Foreign Currency Denominated Notes, the economics for pricing those securities, and the market for Fannie Mae’s FX Discount Notes.
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Issuance and Settlement Fannie Mae issues long-term debt securities in various non-dollar currencies in the form of Foreign Currency Denominated Notes. Fannie Mae typically issues Foreign Currency Denominated Notes through the reverse inquiry process. Through this process, investors communicate their size, maturity, and currency preferences to one of our approved dealers. This dealer then proposes a structure to Fannie Mae and we determine whether the economics of such a transaction meet our funding targets. Fannie Mae was chartered to operate exclusively in the secondary U.S. mortgage market and thus only requires U.S. dollar funding. Because Fannie Mae does not have a natural need for non-dollar funding, in executing foreign currency denominated transactions we immediately enter into an agreement with a dealer counterparty to swap the transaction into U.S. dollars, eliminating Fannie Mae’s foreign currency risk
3/ 27 4/ /20 27 04 5/ /20 27 0 4 6/ /20 27 04 7/ /20 27 0 4 8/ /20 27 04 9/ /20 2 0 10 7/2 4 /2 00 11 7/2 4 /2 00 12 7/2 4 /2 00 7 4 1/ /20 27 04 2/ /20 27 0 3/ /20 5 27 0 4/ /20 5 27 05 5/ /20 27 0 5 6/ /20 27 05 7/ /20 27 0 5 8/ /20 27 05 9/ /20 27 05 10 /2 /2 00 11 7/2 5 /2 00 12 7/2 5 /2 00 7 5 1/ /20 27 05 2/ /20 27 0 3/ /20 6 27 0 4/ /20 6 27 06 5/ /20 27 0 6 6/ /20 27 06 7/ /20 27 0 6 8/ /20 27 06 9/ /20 2 0 10 7/2 6 /2 00 11 7/2 6 /2 00 12 7/2 6 /2 00 7 6 1/ /20 27 06 2/ /20 27 07 /2 00 7
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10-Year Fannie Mae Benchmark Notes 10-Year Euro Denominated AAA Notes 10-Year Euro Denominated AAA Notes Swapped to Dollars
exposure. In determining whether to entertain an investor inquiry for Foreign Currency Denominated Notes, Fannie Mae considers whether the all-in cost of funding, including the foreign currency swap, is commensurate with our targets for a transaction of that maturity and size. If the economics of the transaction are satisfactory to Fannie Mae, we relay that information along with the LIBOR spread level through the dealer who then passes this information along to the investor. Fannie Mae prefers to issue new nondollar transactions in minimum amounts ranging between $50 and $100 million U.S. dollar equivalent. However, Fannie Mae considers investor operational preferences and may adjust the minimum new issue size for our Foreign Currency
Denominated Notes. This allows Fannie Mae to remain flexible in meeting the preferences of many investor types. Should Fannie Mae come to an agreement to issue Foreign Currency Denominated Notes, the settlement process will be similar to that used for Fannie Mae’s U.S. dollar debt issuances with slight variations. Fannie Mae uses the Federal Reserve Clearing system to process its U.S. dollar denominated transactions. However, because this system cannot process non-dollar denominated transactions, Fannie Mae will use an alternative clearing agent, such as Euroclear, Clearstream, or certain other local agents. In terms of listing Foreign Currency Denominated Notes, Fannie Mae remains flexible to market conventions, investor preferences, and the security’s currency.
©2007, Fannie Mae. No part of this document may be duplicated, reproduced, distributed or displayed in public in any manner or by any means without the written permission of Fannie Mae. This document is for the private information of dealers in Fannie Mae securities (“Dealers”) and qualified sophisticated institutional investors. Fannie Mae does not intend to solicit and is not soliciting any action with respect to any Fannie Mae security based upon this document. This document does not constitute, and under no circumstances should it be used as, or considered to be, an offer to sell or a solicitation of an offer to buy the securities or other instruments mentioned herein or derived from such securities or instruments. Fannie Mae expects Dealers to make every effort to assist investors to consider and understand the risks of the securities or instruments mentioned herein. The securities or other instruments mentioned in this document may not be eligible for sale in certain jurisdictions or to certain persons and may not be suitable for all types of investors. Opinions and estimates expressed herein constitute our present judgment and are subject to change without notice. Such opinions or estimates should not be construed as either projections or predictions of value, performance or results; nor as legal, tax, financial, or accounting advice. (See back cover.)
online at www.fanniemae.com → debt securities → fundingnotes
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FUNDINGNOTES Issuances under our Universal Debt Facility may be listed in Luxembourg or on other exchanges.
currency. Fannie Mae makes these payments through an authorized fiscal agent, usually the Bank of New York.
The process for buying Foreign Currency Denominated Notes does not vary from that of U.S. dollar denominated transactions from an investor’s prospective. Upon settlement, the investor delivers funds in the currency of the new issue to their dealer/broker. The security holder then receives scheduled coupon and principal payments in the specified
Pricing Process When Fannie Mae prices a non-dollar denominated debt issue, it must consider whether it can price an issue in the context of the market of the local currency and swap the non-dollar funding it receives into U.S. dollars at a level that is competitive with Fannie Mae’s U.S. dollar-based funding. Because Fannie
Figure 2 Fannie Mae’s issuance of non-dollar debt securities
Issue Date Maturity/Lockout Issue Amount Currency (years) (U.S. dollar equivalent) 8/23/1995 5.0 $ 722,000,000 Deutsche marks 2/16/1996 5.0 504,000,000 Deutsche marks 6/5/1996 3.5 940,556,810 yen 10/1/1996 3.0 91,449,474 Canadian dollars 10/25/1996 4.0 45,454,545 yen 2/19/1997 5.3 3,112,390,000 pound sterling 3/24/1997 4.0 405,925,000 pound sterling 5/21/1997 10.0 79,000,000 yen 6/11/1997 10.0 85,616,438 yen 6/20/1997 5.0 447,180,000 New Zealand dollars 6/27/1997 2.0 85,984,600 U.S. dollars/yen 6/27/1997 10.0 88,261,200 yen 7/10/1997 5.0 751,100,000 Australian dollars 7/29/1997 5.0 193,723,000 Hong Kong dollars 8/15/1997 10.0 743,000,000 Australian dollars 9/5/1997 3.0 745,000,000 Australian dollars 9/26/1997 3.0 317,400,000 New Zealand dollars 10/9/1997 10.0 825,400,000 yen 10/29/1997 10.0 278,609,866 New Zealand dollars 1/23/1998 5.0 38,709,677 Hong Kong dollars 3/9/1998 12.0 74,249,605 yen 3/26/1998 10.0 779,909,530 yen 6/17/1998 1.2 818,500,000 pound sterling 6/29/1998 3.0 51,619,564 Hong Kong dollars 6/29/1998 5.0 38,715,000 Hong Kong dollars 10/16/1998 30.2 531,425,000 pound sterling 12/7/1998 5.0 419,175,000 pound sterling 12/13/1999 21.5 159,700,000 pound sterling 2/14/2001 12.00NC0.5 10,160,000 yen 11/1/2001 15.00NC1.0 20,000,000 yen 4/18/2002 3.0 38,461,538 Hong Kong dollars 1/26/2004 2.0 99,832,539 Hong Kong dollars 2/18/2004 5.0 51,493,306 Hong Kong dollars 2/19/2004 5.0 325,840,612 Singapore dollars 2/25/2004 4.00NC1.0 90,032,250 Hong Kong dollars 3/8/2004 3.0 75,053,609 Singapore dollars Total: $ 14,084,928,163
Mae does not assume foreign currency exchange rate risk, it enters into a foreign exchange swap agreement upon issuance of the debt security to mitigate that risk. Fannie Mae must consider the effect of swapping the coupon payments from U.S. dollars to the issue currency. This currency swap agreement between Fannie Mae and the dealer intermediary is called a basis swap, whereby the dealer agrees to receive coupon payments from Fannie Mae in U.S. dollars and convert those payments to the investor in the issue currency. The agreement simultaneously swaps Fannie Mae’s fixed-rate funding into a floating spread to LIBOR. Fannie Mae will consider issuing nondollar denominated debt securities if the swapped floating U.S. dollar funding that Fannie Mae receives is competitive with that which it receives on similar structures denominated in U.S. dollars. Figure 1 depicts a historical comparison of Fannie Mae’s cost of funds in U.S. dollars for a 10-year bullet versus the estimated hypothetical cost of issuing in euros. The green line shows actual historical asset swap spreads for Fannie Mae’s on-therun 10-year Benchmark Notes. This line represents the approximate asset swap spread that Fannie Mae would require on all new issue bullets with a 10-year maturity. The red line shows the LIBOR spread for a hypothetical AAA-rated 10year issue in euros, or the spread at which Fannie Mae might price a new issue in euros. The blue line depicts that euro LIBOR spread swapped into U.S. dollars using historical basis swap levels. Fannie Mae would respond to investor demand by issuing euro-denominated debt when the estimated U.S. dollar LIBOR spread it would receive, represented by the blue line, is competitive with the spread it receives on U.S. dollar-denominated debt issues, represented by the green line. Figure 1 shows that in recent years, Fannie Mae has experienced very limited opportunities where it was economically attractive to issue euro-denominated debt securities with a 10-year maturity. However, Fannie Mae attempts to issue debt securities in various non-dollar currencies when the economics of such transactions become competitive for Fannie Mae and favorable for its investors.
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FUNDINGNOTES Issuance History Fannie Mae has issued Foreign Currency Denominated Notes in various currencies during previous periods in which the foreign exchange environment made those transactions competitive. Fannie Mae began issuing Foreign Currency Denominated Notes in 1995 and was the first agency to issue debt denominated in yen, Deutsche marks, pounds sterling, Hong Kong dollars, Australian dollars, and New Zealand dollars. As shown in Figure 2, Fannie Mae was most active in issuing pound sterling, yen, and New Zealand, Australian, and Hong Kong dollars beginning in 1997. Then, in 2004, Fannie Mae issued its first Singapore dollar-denominated debt securities. Fannie Mae has issued a total of approximately $14.1 billion in non-dollar denominated long-term debt securities with a wide range of maturities.
Figure 3 Percentage breakdown of FX Discount Notes issuance by currency and investor type Percentage of Issuance by Currencies (Equivalent U.S. Dollars) HKD 51.7% EUR 19.6% USD 16.8% GBP 5.1% CHF 4.2% JPY 1.6% AUD 0.5%
FX Discount Notes Fannie Mae offers foreign currency denominated discount notes in the Euro Commercial Paper Market known as FX Discount Notes. The program, which was launched in April of 2003, enables investors to hold short-term instruments in currencies of their choice and allows Fannie Mae to broaden its investor base while providing added flexibility in raising capital. Fannie Mae has the ability to issue FX Discount Notes in all tradable currencies in maturities ranging from between five and 360 days. All FX Discount Notes trades are executed at the posted sub-Eurodollar/LIBOR spread. The dealer group that manages the distribution of Fannie Mae’s FX Discount Notes includes Banc of America, N.A., Barclay’s Bank PLC, Citigroup International, Credit Suisse (Europe), Deutsche Bank AG London, Goldman Sachs International, Lehman Brothers International, and UBS Limited. At the close of each business day, Fannie Mae posts terms for the next day’s FX Discount Notes issuance to the dealer group, via Bloomberg. These terms include a series of maturity dates, all-in U.S. dollar funding spreads and the relevant pricing index, available size allocations, and eligible currencies. The allocations
CAD 0.5%
Percentage Distribution by Investor Type (Equivalent U.S. Dollars)
Central Banks 62.8% Commercial Banks 15.4% Corporate/Pensions 9.9% Fund Managers 8.2% Other 3.7%
posted are the amounts that dealers may retain for their own account on behalf of investors. Each dealer that executes a trade is responsible for transacting the foreign exchange components of the trade, ensuring that at no time does Fannie Mae have any foreign exchange exposure.
From the inception of the program through February 28, 2007, Fannie Mae has issued the U.S. dollar equivalent of $39.0 billion in FX Discount Notes, with a weighted average maturity of 108 days. Figure 3 shows the percentage distributions by currency and account type for Fannie Mae’s FX Discount Notes
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FUNDINGNOTES issuance since inception of the program. Fannie Mae has issued FX Discount Notes in euros; Swiss francs; pounds sterling; and Australian, Canadian, Hong Kong, and New Zealand dollars. Fannie Mae also issues FX Discount Notes in U.S. dollars, because it provides investors who do not have accounts with the Federal Reserve the opportunity to buy Fannie Mae Discount Notes during their own trading hours.
FUNDINGNOTES
Conclusion Fannie Mae strives to meet the demand for its debt securities across many types of investor segments and, in doing so, remains committed to issuing Foreign Currency Denominated Notes if the economics of such a transaction are favorable to the investor and Fannie Mae. In addition, Fannie Mae offers FX Discount Notes in every tradable currency and has issued the U.S. dollar equivalent of $39.0 billion since the inception of that program in 2003.
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For Fannie Mae’s Investors and Dealers
FundingNotes is published by Fannie Mae’s Fixed-Income Marketing Group Elizabeth Zeuschner Senior Product Manager (202) 752-8489 Daniel Bradford Associate Financial Analyst (202) 752-5691 Website: http://www.fanniemae.com E-mail: [email protected] Help line: (888) BONDHLP
© 2007, Fannie Mae. This document is based upon information and assumptions (including financial, statistical or historical data and computations based upon such data) that we consider reliable and reasonable, but we do not represent that such information, assumptions, data or computations are accurate or complete, or appropriate or useful in any particular context, including the context of any investment decision, and it should not be relied upon as such. In addition, we do not undertake to update any information, data, or computations contained herein, or to communicate any change in the opinions and estimates expressed herein. No representation is made that any strategy, performance or result illustrated herein can or will be achieved or duplicated. The effect of factors other than those assumed, including factors not mentioned, considered or foreseen, by themselves or in conjunction with other factors, could produce dramatically different performance or results. Fannie Mae is the issuer of certain securities and instruments mentioned herein and Fannie Mae or its employees may from time to time have long or short positions in, and buy or sell or engage in other transactions, as principal, with respect to or relating to such securities or instruments. Fannie Mae securities are more fully described in applicable offering circulars, prospectuses, or supplements thereto (such applicable offering circulars, prospectuses and supplements, the “Offering Documentation”), which discuss certain investment risks and contain a more complete description of such securities. All statements made herein are qualified in their entirety by reference to the Offering Documentation. An offering only may be made through delivery of the Offering Documentation. Investors considering purchasing a Fannie Mae security should consult their own financial and legal advisors for information about such security, the risks and investment considerations arising from an investment in such security, the appropriate tools to analyze such investment, and the suitability of such investment in each investor’s particular circumstances. The Debt Securities, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae.
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FUNDINGNOTES Supplement
March 2007
Fannie Mae Debt Issuance
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2004 through February 28, 2007
Debt Issuance (in millions) Discount Notes Benchmark Bills FX Discount Notes 2 Other Short Term 3,6 Total Short Term Benchmark Notes & Bonds Callable Benchmark Notes Subordinated Benchmark Notes 4 Other Callable & Noncallable Notes & Bonds 5,6 Total Long Term 6 Total Debt Issuance 7 Net Issuance Long Term
2004 2005 2006 YTD 2007 $ 1,429,870 $ 2,291,483 $ 1,833,688 $ 273,723 476,139 281,000 196,500 36,758 14,915 10,921 6,386 546 134,835 213,126 235,534 40,880 $ 2,055,759 $ 2,796,530 $ 2,272,109 $ 351,908 $ 38,000 $ 37,000 $ 42,000 $ 7,000 7,000 - - - - - 207,658 118,812 139,314 30,098 $ 252,658 $ 155,812 $ 181,314 $ 37,098 $ 2,308,417 $ 2,952,342 $ 2,453,423 $ 389,006 $ 13,972 $ (40,666) $ 12,058 $ (341)
Notes: 1 Reported amounts represent the face amount at issuance during each reporting period and do not reflect the effect of currency adjustments, debt basis adjustments, or amortization of discounts, premiums, and issuance costs. Previously reported amounts have been revised to conform to the current period presentation and to reflect the completion of Fannie Mae’s 2004 audited financial statements. 2 Other Short Term includes coupon bearing short-term notes, dollar rolls, overnight Fed funds, Benchmark repos, investment agreements, and contingency repo lending. 3 Borrowings with an original contractual maturity of one year or less are reported as short-term. 4 Other Callable & Noncallable Notes & Bonds includes all long-term non-Benchmark Securities such as globals, zero-coupon securities, medium-term notes, Final Maturity Amortizing Notes, and other long-term debt securities. 5 Long-term debt represents borrowings with an original contractual maturity of greater than one year. 6 Numbers may not foot due to rounding. 7 Net Issuance Long Term amounts represent the difference between long-term debt issued and long-term debt redeemed. Numbers presented in this report are subject to change as a result of the ongoing preparation and completion of Fannie Mae’s 2005 and 2006 financial statements and the required audits.
Debt Outstanding
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2004 through February 28, 2007
Debt Outstanding (in millions) 12/31/04 12/31/05 12/31/06 Discount Notes $ 143,455 $ 92,924 $ 83,893 $ Benchmark Bills 157,501 75,000 76,500 FX Discount Notes 6,530 1,818 1,915 2 Other Short Term 9,980 2,799 6,315 3, 7 Total Short Term $ 317,466 $ 172,541 $ 168,623 $ Short term debt average maturity (in days) 61 66 77 Benchmark Notes & Bonds $ 267,091 $ 266,295 $ 261,781 $ Callable Benchmark Notes 31,250 22,370 15,925 Subordinated Benchmark Notes 12,500 12,500 11,000 4, 5 Other Callable & Noncallable Notes & Bonds 324,076 292,538 317,055 6, 7 Total Long Term $ 634,917 $ 593,703 $ 605,761 $ Long term debt average maturity (in months) 47 48 54 7 Total Debt Outstanding $ 952,383 $ 766,244 $ 774,384 $ Total debt average maturity (in months) 32 38 43
2/28/07 76,664 81,258 1,327 5,719 164,969 86 256,781 13,425 9,000 326,215 605,420 55 770,389 44
Notes: 1 Reported amounts represent the unpaid principal balance at each reporting period or, in the case of the long-term zero coupon bonds, at maturity. Unpaid principal balance does not reflect the effect of currency adjustments, debt basis adjustments, or amortization of discounts, premiums, and issuance costs. Previously reported amounts have been revised to conform to the current period presentation and to reflect the completion of Fannie Mae’s 2004 audited financial statements. 2 Other Short Term includes coupon bearing short-term notes, overnight Fed funds, Benchmark repos, investment agreements, and contingency repo lending. 3 Borrowings with an original contractual maturity of one year or less are reported as short term. As a result, securities which have a current maturity of one year or less, but have an original contractual maturity of greater than one year, will be categorized as long term for the purpose of this report. 4 Other Callable & Noncallable Notes & Bonds includes all long-term non-Benchmark Securities such as globals, zero-coupon securities, medium-term notes, Final Maturity Amortizing Notes, and other long-term debt securities. 5 Unamortized discounts and issuance costs of long-term zero coupon securities are approximately $10.4 billion at December 31, 2004, $9.9 billion at December 31, 2005, $11 billion at December 31, 2006, and $11.2 billion at February 28, 2007. 6 Long-term debt represents borrowings with an original contractual maturity of greater than one year. 7 Numbers may not foot due to rounding. Numbers presented in this report are subject to change as a result of the ongoing preparation and completion of Fannie Mae’s 2005 and 2006 financial statements and the required audits.
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FUNDINGNOTES
Citigroup Fannie Mae Index: 3.29 1.39 0.77 3.24 1.27 1-10 Years 3.00 1.21 0.91 3.11 1.19 10+ Years 0.29 3.10 -0.75 4.66 1.87 Callable 0.22 0.68 1.29 3.02 0.99 Noncallable 3.07 1.44 0.73 3.25 1.29 Globals 2.96 1.33 0.77 3.17 1.24 Agency: 9.69 1.42 0.80 3.30 1.35 Callable 0.71 0.99 1.27 3.63 1.25 Noncallable 8.98 1.46 0.76 3.28 1.36 Globals 7.62 1.32 0.77 3.20 1.23 Citigroup Index*: 100.00 1.54 0.92 3.66 1.52 U.S. Treasury 27.64 1.66 0.66 3.18 1.49 GSE** 10.59 1.43 0.80 3.30 1.35 Credit 24.22 1.94 1.11 4.49 1.96 MBS 37.08 1.22 1.01 3.60 1.31 ABS 0.47 1.13 0.90 3.07 1.19
5.30 5.44 4.12 5.46 5.27 5.23 5.35 6.25 5.26 5.35 5.54 4.80 5.37 6.20 5.72 5.57
* Components of Broad (BIG) Index: Treasury, GSE, Corporate, Mortgage ** Includes US Agencies *** Includes World Bank global issues
YTD Total ROR
Last 6 mos Total ROR
Last 12 mos Total Return
5.34 5.45 5.31 5.32 5.54 4.78 5.36 6.20 5.76 5.51 5.96
2007 Debt Redemptions Callable Debt Redeemed (in millions) January $ 3,373 February $ 8,166 Total $ 11,539 Benchmark Buyback (in millions) January $ - February $ - Total $ -
5.400 5.300 5.200 5.100 5.000 4.900 4.800 4.700 3-month 6-month Bill Bill
5.28 5.39 4.43 5.52 5.25 5.26
This data has been compiled from reports supplied by Citigroup and Lehman Brothers and is reproduced here with their permission. The indexes are constructed according to rules developed by these firms and the index values are calculated by them.
5.500
Yields
Last 3 mos Total ROR
Lehman Brothers Fannie Mae Index: 3.76 1.31 0.85 3.22 1.27 1-10 Years 3.40 1.14 0.96 3.06 1.18 10+ Years 0.36 2.77 -0.28 4.81 1.84 Callable 1.11 0.87 1.19 3.09 1.15 Noncallable 2.65 1.50 0.74 3.30 1.33 Globals 2.99 1.39 0.79 3.24 1.28 Agency: 10.97 1.28 0.83 3.18 1.23 Callable 3.10 0.85 1.15 3.04 1.10 Noncallable 7.87 1.45 0.73 3.25 1.29 Globals*** 7.85 1.31 0.80 3.17 1.23 Lehman Aggregate Index: 100.00 1.54 0.91 3.66 1.50 U.S. Treasury 24.48 1.66 0.66 3.18 1.50 Government-Related** 14.68 1.41 0.87 3.36 1.33 Corporate 19.33 2.06 1.14 4.64 2.07 MBS 35.24 1.23 1.02 3.64 1.30 ABS 1.18 1.11 0.90 2.97 1.14 CMBS 5.09 1.64 0.61 3.51 1.33
Constant Maturity Debt Index
4.600
February Total ROR
February % of Agg
Last 12 mos Total Return
YTD Total ROR
Last 6 mos Total ROR
Last 3 mos Total ROR
February Total ROR
February % of Big
Debt Securities Index Reports
1-year Bill
2-year Note
3-year Note
4-year Note
5-year Note
7-year Note
10-year Note
30-year Bond
1/31/2007
5.280
5.297
5.274
5.090
5.069
5.084
5.096
5.120
5.173
5.417
2/28/2007
5.296
5.265
5.086
4.862
4.797
4.804
4.832
4.853
4.933
5.194
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FUNDINGNOTES
Summary Breakdown of 2007 Debt Issuances Year-to-Date Includes all settled fixed rate debt issues with maturities greater than one year. Variable rate debt is not included in totals. Fannie Mae Fixed Rate Callable Debt February 2007 2007 Year-to-Date Maturity/Call Par Amount (# Issues) Par Amount (# Issues) (Year) (in thousands) (in thousands) 2.00NC00.25 $ 500,000 1 $ 2.00NC00.50 100,000 1 2.00NC01.00 850,000 3 2.70NC01.00 2.90NC00.92 25,000 1 3.00NC00.25 75,000 1 3.00NC00.50 3.00NC01.00 1,965,000 6 3.00NC01.50 30,000 1 3.00NC02.00 3.50NC00.25 4.00NC01.00 33,331 4 5.00NC00.25 5.00NC00.50 65,000 2 5.00NC01.00 775,047 7 5.00NC02.00 15,000 1 6.00NC01.00 8,441 2 6.00NC01.25 15,000 1 7.00NC00.25 7.80NC00.25 7.90NC00.92 5,380 1
1,250,000 125,000 2,750,000 10,000 25,000 650,000 318,000 2,475,484 790,000 525,000 75,000 43,411 270,000 165,000 3,355,102 265,000 8,441 15,000 25,000 20,000 5,380
9 2 15 1 1 5 3 10 4 2 2 5 5 3 21 2 2 1 1 1 1
Maturity/Call (Year)
February 2007 Par Amount (# Issues) (in thousands)
2007 Year-to-Date Par Amount (# Issues) (in thousands)
8.00NC01.00 $ 14,857 3 $ 39,450 9.00NC00.25 15,000 10.00NC00.25 470,000 3 520,000 10.00NC00.50 130,000 2 295,000 10.00NC01.00 525,000 2 1,158,192 10.00NC01.50 1,250,000 2 1,250,000 10.00NC02.00 250,000 1 250,000 10.00NC03.00 1,660,000 4 1,710,000 12.00NC01.00 65,773 5 76,713 14.80NC00.83 200,000 1 200,000 15.00NC00.25 250,000 15.00NC01.00 675,000 4 875,000 15.00NC03.00 10,409 4 21,870 15.30NC00.25 50,000 1 50,000 20.00NC01.00 100,000 1 102,333 20.30NC07.25 100,000 25.00NC01.00 12,959 2 12,959 29.90NC00.92 9,824 1 9,824 30.00NC01.00 7,682 1 246,215 30.00NC02.00 165,000 30.00NC10.00 10,000 1 10,000 Total $ 9,903,703 70 $ 20,523,374
6 1 4 5 8 2 1 5 7 1 3 8 6 1 2 1 2 1 5 1 1 167
Summary Breakdown of 2007 Debt Issuances Year-to-Date Fannie Mae Noncallable Benchmark Notes February 2007 2007 Year to Date Maturity Par Amount (# Issues) Par Amount (#Issues) 2 Years 3 Years 5 Years $ 3,000,000,000 1 $ 3,000,000,000 1 10 Years* $ 1,000,000,000 $ 4,000,000,000 1 Total* $ 3,000,000,000 1 $ 4,000,000,000 2 *Includes the reopening of $1 billion 10-year Benchmark Notes via Dutch auction on February 13, 1007.
Recent Benchmark Notes Transaction Benchmark Securities
Pricing Date and Spread
Geographic Distribution
Investor Type Distribution
Banc of America Barclays Deutsche Bank Goldman Sachs HSBC Lehman Brothers Morgan Stanley
February 13, 2007 +27 basis points 4.750 % 01/31/2012 U.S. Treasury
U.S. 58% Asia 21% Europe 19% Other 2%
Fund Manager 24% Comm. Banks 27% Insurance 11% Central Banks 33% State & Local 4% Retail 1%
N/A
February 13, 2007 98.770
N/A
N/A
Size/Cusip
Lead-Managers
Co-Managers
5 year 5.000 % 2/16/2012
$3.0 billion 31359M5H2
Bear Stearns Citigroup JP Morgan
Reopening 10 year 5.000% 2/13/2017
$1.0 billion 31359M4D2
N/A
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FUNDINGNOTES For Fannie Mae’s Investors and Dealers
March 2007
Fannie Mae’s Issuance of Non-Dollar Denominated Debt Securities
Foreign Currency Denominated Notes
Figure 1 Fannie Mae’s U.S. dollar-based LIBOR spreads versus a hypothetical issue in euros 25 20 15 10 (basis points)
Fannie Mae strives to remain flexible in responding to investor demand for its debt securities and maintain a broad investor base. One example of this flexibility is Fannie Mae’s ability to issue short- and long-term debt securities in various currencies. FX Discount Notes and Foreign Currency Denominated Notes allow investors to purchase high credit quality debt securities in the currency of their choice with the possibility of obtaining a yield spread over their local government debt. In this edition of FundingNotes, we will discuss the issuance and settlement processes for Fannie Mae’s Foreign Currency Denominated Notes, the economics for pricing those securities, and the market for Fannie Mae’s FX Discount Notes.
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-10 -15 -20
Issuance and Settlement Fannie Mae issues long-term debt securities in various non-dollar currencies in the form of Foreign Currency Denominated Notes. Fannie Mae typically issues Foreign Currency Denominated Notes through the reverse inquiry process. Through this process, investors communicate their size, maturity, and currency preferences to one of our approved dealers. This dealer then proposes a structure to Fannie Mae and we determine whether the economics of such a transaction meet our funding targets. Fannie Mae was chartered to operate exclusively in the secondary U.S. mortgage market and thus only requires U.S. dollar funding. Because Fannie Mae does not have a natural need for non-dollar funding, in executing foreign currency denominated transactions we immediately enter into an agreement with a dealer counterparty to swap the transaction into U.S. dollars, eliminating Fannie Mae’s foreign currency risk
3/ 27 4/ /20 27 04 5/ /20 27 0 4 6/ /20 27 04 7/ /20 27 0 4 8/ /20 27 04 9/ /20 2 0 10 7/2 4 /2 00 11 7/2 4 /2 00 12 7/2 4 /2 00 7 4 1/ /20 27 04 2/ /20 27 0 3/ /20 5 27 0 4/ /20 5 27 05 5/ /20 27 0 5 6/ /20 27 05 7/ /20 27 0 5 8/ /20 27 05 9/ /20 27 05 10 /2 /2 00 11 7/2 5 /2 00 12 7/2 5 /2 00 7 5 1/ /20 27 05 2/ /20 27 0 3/ /20 6 27 0 4/ /20 6 27 06 5/ /20 27 0 6 6/ /20 27 06 7/ /20 27 0 6 8/ /20 27 06 9/ /20 2 0 10 7/2 6 /2 00 11 7/2 6 /2 00 12 7/2 6 /2 00 7 6 1/ /20 27 06 2/ /20 27 07 /2 00 7
-25
10-Year Fannie Mae Benchmark Notes 10-Year Euro Denominated AAA Notes 10-Year Euro Denominated AAA Notes Swapped to Dollars
exposure. In determining whether to entertain an investor inquiry for Foreign Currency Denominated Notes, Fannie Mae considers whether the all-in cost of funding, including the foreign currency swap, is commensurate with our targets for a transaction of that maturity and size. If the economics of the transaction are satisfactory to Fannie Mae, we relay that information along with the LIBOR spread level through the dealer who then passes this information along to the investor. Fannie Mae prefers to issue new nondollar transactions in minimum amounts ranging between $50 and $100 million U.S. dollar equivalent. However, Fannie Mae considers investor operational preferences and may adjust the minimum new issue size for our Foreign Currency
Denominated Notes. This allows Fannie Mae to remain flexible in meeting the preferences of many investor types. Should Fannie Mae come to an agreement to issue Foreign Currency Denominated Notes, the settlement process will be similar to that used for Fannie Mae’s U.S. dollar debt issuances with slight variations. Fannie Mae uses the Federal Reserve Clearing system to process its U.S. dollar denominated transactions. However, because this system cannot process non-dollar denominated transactions, Fannie Mae will use an alternative clearing agent, such as Euroclear, Clearstream, or certain other local agents. In terms of listing Foreign Currency Denominated Notes, Fannie Mae remains flexible to market conventions, investor preferences, and the security’s currency.
©2007, Fannie Mae. No part of this document may be duplicated, reproduced, distributed or displayed in public in any manner or by any means without the written permission of Fannie Mae. This document is for the private information of dealers in Fannie Mae securities (“Dealers”) and qualified sophisticated institutional investors. Fannie Mae does not intend to solicit and is not soliciting any action with respect to any Fannie Mae security based upon this document. This document does not constitute, and under no circumstances should it be used as, or considered to be, an offer to sell or a solicitation of an offer to buy the securities or other instruments mentioned herein or derived from such securities or instruments. Fannie Mae expects Dealers to make every effort to assist investors to consider and understand the risks of the securities or instruments mentioned herein. The securities or other instruments mentioned in this document may not be eligible for sale in certain jurisdictions or to certain persons and may not be suitable for all types of investors. Opinions and estimates expressed herein constitute our present judgment and are subject to change without notice. Such opinions or estimates should not be construed as either projections or predictions of value, performance or results; nor as legal, tax, financial, or accounting advice. (See back cover.)
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FUNDINGNOTES Issuances under our Universal Debt Facility may be listed in Luxembourg or on other exchanges.
currency. Fannie Mae makes these payments through an authorized fiscal agent, usually the Bank of New York.
The process for buying Foreign Currency Denominated Notes does not vary from that of U.S. dollar denominated transactions from an investor’s prospective. Upon settlement, the investor delivers funds in the currency of the new issue to their dealer/broker. The security holder then receives scheduled coupon and principal payments in the specified
Pricing Process When Fannie Mae prices a non-dollar denominated debt issue, it must consider whether it can price an issue in the context of the market of the local currency and swap the non-dollar funding it receives into U.S. dollars at a level that is competitive with Fannie Mae’s U.S. dollar-based funding. Because Fannie
Figure 2 Fannie Mae’s issuance of non-dollar debt securities
Issue Date Maturity/Lockout Issue Amount Currency (years) (U.S. dollar equivalent) 8/23/1995 5.0 $ 722,000,000 Deutsche marks 2/16/1996 5.0 504,000,000 Deutsche marks 6/5/1996 3.5 940,556,810 yen 10/1/1996 3.0 91,449,474 Canadian dollars 10/25/1996 4.0 45,454,545 yen 2/19/1997 5.3 3,112,390,000 pound sterling 3/24/1997 4.0 405,925,000 pound sterling 5/21/1997 10.0 79,000,000 yen 6/11/1997 10.0 85,616,438 yen 6/20/1997 5.0 447,180,000 New Zealand dollars 6/27/1997 2.0 85,984,600 U.S. dollars/yen 6/27/1997 10.0 88,261,200 yen 7/10/1997 5.0 751,100,000 Australian dollars 7/29/1997 5.0 193,723,000 Hong Kong dollars 8/15/1997 10.0 743,000,000 Australian dollars 9/5/1997 3.0 745,000,000 Australian dollars 9/26/1997 3.0 317,400,000 New Zealand dollars 10/9/1997 10.0 825,400,000 yen 10/29/1997 10.0 278,609,866 New Zealand dollars 1/23/1998 5.0 38,709,677 Hong Kong dollars 3/9/1998 12.0 74,249,605 yen 3/26/1998 10.0 779,909,530 yen 6/17/1998 1.2 818,500,000 pound sterling 6/29/1998 3.0 51,619,564 Hong Kong dollars 6/29/1998 5.0 38,715,000 Hong Kong dollars 10/16/1998 30.2 531,425,000 pound sterling 12/7/1998 5.0 419,175,000 pound sterling 12/13/1999 21.5 159,700,000 pound sterling 2/14/2001 12.00NC0.5 10,160,000 yen 11/1/2001 15.00NC1.0 20,000,000 yen 4/18/2002 3.0 38,461,538 Hong Kong dollars 1/26/2004 2.0 99,832,539 Hong Kong dollars 2/18/2004 5.0 51,493,306 Hong Kong dollars 2/19/2004 5.0 325,840,612 Singapore dollars 2/25/2004 4.00NC1.0 90,032,250 Hong Kong dollars 3/8/2004 3.0 75,053,609 Singapore dollars Total: $ 14,084,928,163
Mae does not assume foreign currency exchange rate risk, it enters into a foreign exchange swap agreement upon issuance of the debt security to mitigate that risk. Fannie Mae must consider the effect of swapping the coupon payments from U.S. dollars to the issue currency. This currency swap agreement between Fannie Mae and the dealer intermediary is called a basis swap, whereby the dealer agrees to receive coupon payments from Fannie Mae in U.S. dollars and convert those payments to the investor in the issue currency. The agreement simultaneously swaps Fannie Mae’s fixed-rate funding into a floating spread to LIBOR. Fannie Mae will consider issuing nondollar denominated debt securities if the swapped floating U.S. dollar funding that Fannie Mae receives is competitive with that which it receives on similar structures denominated in U.S. dollars. Figure 1 depicts a historical comparison of Fannie Mae’s cost of funds in U.S. dollars for a 10-year bullet versus the estimated hypothetical cost of issuing in euros. The green line shows actual historical asset swap spreads for Fannie Mae’s on-therun 10-year Benchmark Notes. This line represents the approximate asset swap spread that Fannie Mae would require on all new issue bullets with a 10-year maturity. The red line shows the LIBOR spread for a hypothetical AAA-rated 10year issue in euros, or the spread at which Fannie Mae might price a new issue in euros. The blue line depicts that euro LIBOR spread swapped into U.S. dollars using historical basis swap levels. Fannie Mae would respond to investor demand by issuing euro-denominated debt when the estimated U.S. dollar LIBOR spread it would receive, represented by the blue line, is competitive with the spread it receives on U.S. dollar-denominated debt issues, represented by the green line. Figure 1 shows that in recent years, Fannie Mae has experienced very limited opportunities where it was economically attractive to issue euro-denominated debt securities with a 10-year maturity. However, Fannie Mae attempts to issue debt securities in various non-dollar currencies when the economics of such transactions become competitive for Fannie Mae and favorable for its investors.
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FUNDINGNOTES Issuance History Fannie Mae has issued Foreign Currency Denominated Notes in various currencies during previous periods in which the foreign exchange environment made those transactions competitive. Fannie Mae began issuing Foreign Currency Denominated Notes in 1995 and was the first agency to issue debt denominated in yen, Deutsche marks, pounds sterling, Hong Kong dollars, Australian dollars, and New Zealand dollars. As shown in Figure 2, Fannie Mae was most active in issuing pound sterling, yen, and New Zealand, Australian, and Hong Kong dollars beginning in 1997. Then, in 2004, Fannie Mae issued its first Singapore dollar-denominated debt securities. Fannie Mae has issued a total of approximately $14.1 billion in non-dollar denominated long-term debt securities with a wide range of maturities.
Figure 3 Percentage breakdown of FX Discount Notes issuance by currency and investor type Percentage of Issuance by Currencies (Equivalent U.S. Dollars) HKD 51.7% EUR 19.6% USD 16.8% GBP 5.1% CHF 4.2% JPY 1.6% AUD 0.5%
FX Discount Notes Fannie Mae offers foreign currency denominated discount notes in the Euro Commercial Paper Market known as FX Discount Notes. The program, which was launched in April of 2003, enables investors to hold short-term instruments in currencies of their choice and allows Fannie Mae to broaden its investor base while providing added flexibility in raising capital. Fannie Mae has the ability to issue FX Discount Notes in all tradable currencies in maturities ranging from between five and 360 days. All FX Discount Notes trades are executed at the posted sub-Eurodollar/LIBOR spread. The dealer group that manages the distribution of Fannie Mae’s FX Discount Notes includes Banc of America, N.A., Barclay’s Bank PLC, Citigroup International, Credit Suisse (Europe), Deutsche Bank AG London, Goldman Sachs International, Lehman Brothers International, and UBS Limited. At the close of each business day, Fannie Mae posts terms for the next day’s FX Discount Notes issuance to the dealer group, via Bloomberg. These terms include a series of maturity dates, all-in U.S. dollar funding spreads and the relevant pricing index, available size allocations, and eligible currencies. The allocations
CAD 0.5%
Percentage Distribution by Investor Type (Equivalent U.S. Dollars)
Central Banks 62.8% Commercial Banks 15.4% Corporate/Pensions 9.9% Fund Managers 8.2% Other 3.7%
posted are the amounts that dealers may retain for their own account on behalf of investors. Each dealer that executes a trade is responsible for transacting the foreign exchange components of the trade, ensuring that at no time does Fannie Mae have any foreign exchange exposure.
From the inception of the program through February 28, 2007, Fannie Mae has issued the U.S. dollar equivalent of $39.0 billion in FX Discount Notes, with a weighted average maturity of 108 days. Figure 3 shows the percentage distributions by currency and account type for Fannie Mae’s FX Discount Notes
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FUNDINGNOTES issuance since inception of the program. Fannie Mae has issued FX Discount Notes in euros; Swiss francs; pounds sterling; and Australian, Canadian, Hong Kong, and New Zealand dollars. Fannie Mae also issues FX Discount Notes in U.S. dollars, because it provides investors who do not have accounts with the Federal Reserve the opportunity to buy Fannie Mae Discount Notes during their own trading hours.
FUNDINGNOTES
Conclusion Fannie Mae strives to meet the demand for its debt securities across many types of investor segments and, in doing so, remains committed to issuing Foreign Currency Denominated Notes if the economics of such a transaction are favorable to the investor and Fannie Mae. In addition, Fannie Mae offers FX Discount Notes in every tradable currency and has issued the U.S. dollar equivalent of $39.0 billion since the inception of that program in 2003.
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For Fannie Mae’s Investors and Dealers
FundingNotes is published by Fannie Mae’s Fixed-Income Marketing Group Elizabeth Zeuschner Senior Product Manager (202) 752-8489 Daniel Bradford Associate Financial Analyst (202) 752-5691 Website: http://www.fanniemae.com E-mail: [email protected] Help line: (888) BONDHLP
© 2007, Fannie Mae. This document is based upon information and assumptions (including financial, statistical or historical data and computations based upon such data) that we consider reliable and reasonable, but we do not represent that such information, assumptions, data or computations are accurate or complete, or appropriate or useful in any particular context, including the context of any investment decision, and it should not be relied upon as such. In addition, we do not undertake to update any information, data, or computations contained herein, or to communicate any change in the opinions and estimates expressed herein. No representation is made that any strategy, performance or result illustrated herein can or will be achieved or duplicated. The effect of factors other than those assumed, including factors not mentioned, considered or foreseen, by themselves or in conjunction with other factors, could produce dramatically different performance or results. Fannie Mae is the issuer of certain securities and instruments mentioned herein and Fannie Mae or its employees may from time to time have long or short positions in, and buy or sell or engage in other transactions, as principal, with respect to or relating to such securities or instruments. Fannie Mae securities are more fully described in applicable offering circulars, prospectuses, or supplements thereto (such applicable offering circulars, prospectuses and supplements, the “Offering Documentation”), which discuss certain investment risks and contain a more complete description of such securities. All statements made herein are qualified in their entirety by reference to the Offering Documentation. An offering only may be made through delivery of the Offering Documentation. Investors considering purchasing a Fannie Mae security should consult their own financial and legal advisors for information about such security, the risks and investment considerations arising from an investment in such security, the appropriate tools to analyze such investment, and the suitability of such investment in each investor’s particular circumstances. The Debt Securities, together with interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than Fannie Mae.
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FUNDINGNOTES Supplement
March 2007
Fannie Mae Debt Issuance
1
2004 through February 28, 2007
Debt Issuance (in millions) Discount Notes Benchmark Bills FX Discount Notes 2 Other Short Term 3,6 Total Short Term Benchmark Notes & Bonds Callable Benchmark Notes Subordinated Benchmark Notes 4 Other Callable & Noncallable Notes & Bonds 5,6 Total Long Term 6 Total Debt Issuance 7 Net Issuance Long Term
2004 2005 2006 YTD 2007 $ 1,429,870 $ 2,291,483 $ 1,833,688 $ 273,723 476,139 281,000 196,500 36,758 14,915 10,921 6,386 546 134,835 213,126 235,534 40,880 $ 2,055,759 $ 2,796,530 $ 2,272,109 $ 351,908 $ 38,000 $ 37,000 $ 42,000 $ 7,000 7,000 - - - - - 207,658 118,812 139,314 30,098 $ 252,658 $ 155,812 $ 181,314 $ 37,098 $ 2,308,417 $ 2,952,342 $ 2,453,423 $ 389,006 $ 13,972 $ (40,666) $ 12,058 $ (341)
Notes: 1 Reported amounts represent the face amount at issuance during each reporting period and do not reflect the effect of currency adjustments, debt basis adjustments, or amortization of discounts, premiums, and issuance costs. Previously reported amounts have been revised to conform to the current period presentation and to reflect the completion of Fannie Mae’s 2004 audited financial statements. 2 Other Short Term includes coupon bearing short-term notes, dollar rolls, overnight Fed funds, Benchmark repos, investment agreements, and contingency repo lending. 3 Borrowings with an original contractual maturity of one year or less are reported as short-term. 4 Other Callable & Noncallable Notes & Bonds includes all long-term non-Benchmark Securities such as globals, zero-coupon securities, medium-term notes, Final Maturity Amortizing Notes, and other long-term debt securities. 5 Long-term debt represents borrowings with an original contractual maturity of greater than one year. 6 Numbers may not foot due to rounding. 7 Net Issuance Long Term amounts represent the difference between long-term debt issued and long-term debt redeemed. Numbers presented in this report are subject to change as a result of the ongoing preparation and completion of Fannie Mae’s 2005 and 2006 financial statements and the required audits.
Debt Outstanding
1
2004 through February 28, 2007
Debt Outstanding (in millions) 12/31/04 12/31/05 12/31/06 Discount Notes $ 143,455 $ 92,924 $ 83,893 $ Benchmark Bills 157,501 75,000 76,500 FX Discount Notes 6,530 1,818 1,915 2 Other Short Term 9,980 2,799 6,315 3, 7 Total Short Term $ 317,466 $ 172,541 $ 168,623 $ Short term debt average maturity (in days) 61 66 77 Benchmark Notes & Bonds $ 267,091 $ 266,295 $ 261,781 $ Callable Benchmark Notes 31,250 22,370 15,925 Subordinated Benchmark Notes 12,500 12,500 11,000 4, 5 Other Callable & Noncallable Notes & Bonds 324,076 292,538 317,055 6, 7 Total Long Term $ 634,917 $ 593,703 $ 605,761 $ Long term debt average maturity (in months) 47 48 54 7 Total Debt Outstanding $ 952,383 $ 766,244 $ 774,384 $ Total debt average maturity (in months) 32 38 43
2/28/07 76,664 81,258 1,327 5,719 164,969 86 256,781 13,425 9,000 326,215 605,420 55 770,389 44
Notes: 1 Reported amounts represent the unpaid principal balance at each reporting period or, in the case of the long-term zero coupon bonds, at maturity. Unpaid principal balance does not reflect the effect of currency adjustments, debt basis adjustments, or amortization of discounts, premiums, and issuance costs. Previously reported amounts have been revised to conform to the current period presentation and to reflect the completion of Fannie Mae’s 2004 audited financial statements. 2 Other Short Term includes coupon bearing short-term notes, overnight Fed funds, Benchmark repos, investment agreements, and contingency repo lending. 3 Borrowings with an original contractual maturity of one year or less are reported as short term. As a result, securities which have a current maturity of one year or less, but have an original contractual maturity of greater than one year, will be categorized as long term for the purpose of this report. 4 Other Callable & Noncallable Notes & Bonds includes all long-term non-Benchmark Securities such as globals, zero-coupon securities, medium-term notes, Final Maturity Amortizing Notes, and other long-term debt securities. 5 Unamortized discounts and issuance costs of long-term zero coupon securities are approximately $10.4 billion at December 31, 2004, $9.9 billion at December 31, 2005, $11 billion at December 31, 2006, and $11.2 billion at February 28, 2007. 6 Long-term debt represents borrowings with an original contractual maturity of greater than one year. 7 Numbers may not foot due to rounding. Numbers presented in this report are subject to change as a result of the ongoing preparation and completion of Fannie Mae’s 2005 and 2006 financial statements and the required audits.
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FUNDINGNOTES
Citigroup Fannie Mae Index: 3.29 1.39 0.77 3.24 1.27 1-10 Years 3.00 1.21 0.91 3.11 1.19 10+ Years 0.29 3.10 -0.75 4.66 1.87 Callable 0.22 0.68 1.29 3.02 0.99 Noncallable 3.07 1.44 0.73 3.25 1.29 Globals 2.96 1.33 0.77 3.17 1.24 Agency: 9.69 1.42 0.80 3.30 1.35 Callable 0.71 0.99 1.27 3.63 1.25 Noncallable 8.98 1.46 0.76 3.28 1.36 Globals 7.62 1.32 0.77 3.20 1.23 Citigroup Index*: 100.00 1.54 0.92 3.66 1.52 U.S. Treasury 27.64 1.66 0.66 3.18 1.49 GSE** 10.59 1.43 0.80 3.30 1.35 Credit 24.22 1.94 1.11 4.49 1.96 MBS 37.08 1.22 1.01 3.60 1.31 ABS 0.47 1.13 0.90 3.07 1.19
5.30 5.44 4.12 5.46 5.27 5.23 5.35 6.25 5.26 5.35 5.54 4.80 5.37 6.20 5.72 5.57
* Components of Broad (BIG) Index: Treasury, GSE, Corporate, Mortgage ** Includes US Agencies *** Includes World Bank global issues
YTD Total ROR
Last 6 mos Total ROR
Last 12 mos Total Return
5.34 5.45 5.31 5.32 5.54 4.78 5.36 6.20 5.76 5.51 5.96
2007 Debt Redemptions Callable Debt Redeemed (in millions) January $ 3,373 February $ 8,166 Total $ 11,539 Benchmark Buyback (in millions) January $ - February $ - Total $ -
5.400 5.300 5.200 5.100 5.000 4.900 4.800 4.700 3-month 6-month Bill Bill
5.28 5.39 4.43 5.52 5.25 5.26
This data has been compiled from reports supplied by Citigroup and Lehman Brothers and is reproduced here with their permission. The indexes are constructed according to rules developed by these firms and the index values are calculated by them.
5.500
Yields
Last 3 mos Total ROR
Lehman Brothers Fannie Mae Index: 3.76 1.31 0.85 3.22 1.27 1-10 Years 3.40 1.14 0.96 3.06 1.18 10+ Years 0.36 2.77 -0.28 4.81 1.84 Callable 1.11 0.87 1.19 3.09 1.15 Noncallable 2.65 1.50 0.74 3.30 1.33 Globals 2.99 1.39 0.79 3.24 1.28 Agency: 10.97 1.28 0.83 3.18 1.23 Callable 3.10 0.85 1.15 3.04 1.10 Noncallable 7.87 1.45 0.73 3.25 1.29 Globals*** 7.85 1.31 0.80 3.17 1.23 Lehman Aggregate Index: 100.00 1.54 0.91 3.66 1.50 U.S. Treasury 24.48 1.66 0.66 3.18 1.50 Government-Related** 14.68 1.41 0.87 3.36 1.33 Corporate 19.33 2.06 1.14 4.64 2.07 MBS 35.24 1.23 1.02 3.64 1.30 ABS 1.18 1.11 0.90 2.97 1.14 CMBS 5.09 1.64 0.61 3.51 1.33
Constant Maturity Debt Index
4.600
February Total ROR
February % of Agg
Last 12 mos Total Return
YTD Total ROR
Last 6 mos Total ROR
Last 3 mos Total ROR
February Total ROR
February % of Big
Debt Securities Index Reports
1-year Bill
2-year Note
3-year Note
4-year Note
5-year Note
7-year Note
10-year Note
30-year Bond
1/31/2007
5.280
5.297
5.274
5.090
5.069
5.084
5.096
5.120
5.173
5.417
2/28/2007
5.296
5.265
5.086
4.862
4.797
4.804
4.832
4.853
4.933
5.194
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FUNDINGNOTES
Summary Breakdown of 2007 Debt Issuances Year-to-Date Includes all settled fixed rate debt issues with maturities greater than one year. Variable rate debt is not included in totals. Fannie Mae Fixed Rate Callable Debt February 2007 2007 Year-to-Date Maturity/Call Par Amount (# Issues) Par Amount (# Issues) (Year) (in thousands) (in thousands) 2.00NC00.25 $ 500,000 1 $ 2.00NC00.50 100,000 1 2.00NC01.00 850,000 3 2.70NC01.00 2.90NC00.92 25,000 1 3.00NC00.25 75,000 1 3.00NC00.50 3.00NC01.00 1,965,000 6 3.00NC01.50 30,000 1 3.00NC02.00 3.50NC00.25 4.00NC01.00 33,331 4 5.00NC00.25 5.00NC00.50 65,000 2 5.00NC01.00 775,047 7 5.00NC02.00 15,000 1 6.00NC01.00 8,441 2 6.00NC01.25 15,000 1 7.00NC00.25 7.80NC00.25 7.90NC00.92 5,380 1
1,250,000 125,000 2,750,000 10,000 25,000 650,000 318,000 2,475,484 790,000 525,000 75,000 43,411 270,000 165,000 3,355,102 265,000 8,441 15,000 25,000 20,000 5,380
9 2 15 1 1 5 3 10 4 2 2 5 5 3 21 2 2 1 1 1 1
Maturity/Call (Year)
February 2007 Par Amount (# Issues) (in thousands)
2007 Year-to-Date Par Amount (# Issues) (in thousands)
8.00NC01.00 $ 14,857 3 $ 39,450 9.00NC00.25 15,000 10.00NC00.25 470,000 3 520,000 10.00NC00.50 130,000 2 295,000 10.00NC01.00 525,000 2 1,158,192 10.00NC01.50 1,250,000 2 1,250,000 10.00NC02.00 250,000 1 250,000 10.00NC03.00 1,660,000 4 1,710,000 12.00NC01.00 65,773 5 76,713 14.80NC00.83 200,000 1 200,000 15.00NC00.25 250,000 15.00NC01.00 675,000 4 875,000 15.00NC03.00 10,409 4 21,870 15.30NC00.25 50,000 1 50,000 20.00NC01.00 100,000 1 102,333 20.30NC07.25 100,000 25.00NC01.00 12,959 2 12,959 29.90NC00.92 9,824 1 9,824 30.00NC01.00 7,682 1 246,215 30.00NC02.00 165,000 30.00NC10.00 10,000 1 10,000 Total $ 9,903,703 70 $ 20,523,374
6 1 4 5 8 2 1 5 7 1 3 8 6 1 2 1 2 1 5 1 1 167
Summary Breakdown of 2007 Debt Issuances Year-to-Date Fannie Mae Noncallable Benchmark Notes February 2007 2007 Year to Date Maturity Par Amount (# Issues) Par Amount (#Issues) 2 Years 3 Years 5 Years $ 3,000,000,000 1 $ 3,000,000,000 1 10 Years* $ 1,000,000,000 $ 4,000,000,000 1 Total* $ 3,000,000,000 1 $ 4,000,000,000 2 *Includes the reopening of $1 billion 10-year Benchmark Notes via Dutch auction on February 13, 1007.
Recent Benchmark Notes Transaction Benchmark Securities
Pricing Date and Spread
Geographic Distribution
Investor Type Distribution
Banc of America Barclays Deutsche Bank Goldman Sachs HSBC Lehman Brothers Morgan Stanley
February 13, 2007 +27 basis points 4.750 % 01/31/2012 U.S. Treasury
U.S. 58% Asia 21% Europe 19% Other 2%
Fund Manager 24% Comm. Banks 27% Insurance 11% Central Banks 33% State & Local 4% Retail 1%
N/A
February 13, 2007 98.770
N/A
N/A
Size/Cusip
Lead-Managers
Co-Managers
5 year 5.000 % 2/16/2012
$3.0 billion 31359M5H2
Bear Stearns Citigroup JP Morgan
Reopening 10 year 5.000% 2/13/2017
$1.0 billion 31359M4D2
N/A
