FHLBank bonds offer investors a wide variety of sizes, structures and maturities to meet numerous portfolio objectives. All bonds are rated by Moody's (Aaa) and S&P (AA+), and for domestic investors, 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 70 underwriters. Bonds offered daily via auction include fixed-rate bullets (through the TAP Issue Program), and American-style callables.
The TAP Issue Program uses an auction platform to issue fixed-rate 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.
American-style callable bonds are auctioned daily through the callable bidding group of approximately 20 underwriters.
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 using the Auctions link under both the Callable Bonds and TAP Issues sections of this website, on Bloomberg, Tradeweb, and other financial news services. Details on negotiated bonds can be found in the New Bond Issues section.
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 bonds are awarded, 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.
Bond offerings issued under the domestic funding programs from July 1, 2009 to March 19, 2012 are issued pursuant to and remain subject to the 2009 Offering Circular for Consolidated Bonds and Consolidated Discount Notes. Bond offerings issued on or after March 19, 2012 are subject to the FHLBank Information Memorandum for Consolidated Bonds and Consolidated Discount Notes (Including Global Bond Program), 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. After the settlement date, you can find these documents by visiting the Offering Notices/Pricing Supplements page and searching for the bond by CUSIP. They are also posted on Bloomberg.