Investor demand for short-term securities (one year or less) may be met through FHLBank Discount Note (DN) programs. All FHLBank DNs earn the highest credit ratings from both Moody's and S&P (P-1/A-1+), and all are exempt from state and local income tax for domestic U.S. investors. FHLBank DNs are characterized by competitive rates, efficient trade execution, and responsiveness to reverse inquiries.
Rates and Maturities
DNs are available in maturities of one year or less, with the largest volume typically in the one- to 90-day range. Rates and maturity categories for both window and auctioned DNs are set frequently and announced publicly on Reuters and through other major wire services. This information is also posted in real-time under the Window Rates and Auctions links in this section of the website.
As of November 15, 2013, the FHLBanks have the operational capability to price DNs at a discount, par or premium, using the actual number of days to maturity divided by 360. Upon maturity, the par value of the note is paid in full. Please review the supplemented FHLBank Information Memorandum for Consolidated Bonds and Consolidated Discount Notes (Including Global Debt Program) for further details.
DNs may be offered into the market through the window, or through regularly scheduled competitive auctions. DNs issued through the window are priced daily and distributed through a primary selling group, and a reallowance group of approximately 50 FHLBank underwriters.
DNs are auctioned twice weekly, on Tuesdays and Thursdays, to the selling group members. Four standard maturities are available: 4-, 8-, 13-, and 26-weeks. These maturities are typically auctioned in sizes from $500 million to over $5 billion each. The OF is responsive to reverse inquiry. Dealers interested in specific dollar volume and/or maturities should contact the OF. Also, investors interested in DNs should contact their financial services provider. The size and variety of DNs and bonds available for sale is dependent on the FHLBanks' funding needs on any given day. FHLBank DNs are sold subject to a minimum of $100,000 and $1,000 increments. After issuance, DNs can be traded in the secondary market through securities dealers and banks.
Settlement and Delivery
DNs are generally available with same day, next business day, and two or more business day settlement. Settlement is in immediately available funds. DNs are issued in the U.S. only in book-entry form and are transferred through the Fedwire.
DN offerings are subject to the FHLBank Information Memorandum for Consolidated Bonds and Consolidated Discount Notes (Including Global Debt Program), and as supplemented from time to time. Dealers should provide this document to investors prior to or at settlement.