Freddie Mac 2015 Annual Report Download - page 75
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Management's Discussion and Analysis Our Business Segments | Investments
Freddie Mac 2015 Form 10-K 73
MARKET CONDITIONS
The following graph and related discussion presents the par swap rate curve for the most recent three
years. As our derivatives and variable-rate debt are generally LIBOR-based, changes in par swap rates
can significantly affect the business and financial results of our Investments segment.
Par Swap Rates as of December 31,
Sources: Bloomberg, ICAP
Commentary
• We primarily use LIBOR-based derivatives and fixed-rate debt to hedge our interest rate risk. The
mortgage-related investments portfolio's exposure to interest rate risk is calculated by our models that
project loan and security cash flows over a variety of scenarios. For additional information on our
exposure to interest rate risk, see "Risk Management - Interest-Rate Risk and Other Market Risks."
• Changes in interest rates affect the fair value of our derivatives. Our primary derivative instruments
are interest-rate swaps, including pay-fixed and receive-fixed interest-rate swaps. With a pay-fixed
interest-rate swap, as interest rates decline, we recognize derivative losses. Conversely, as interest