Fannie Mae 2006 Annual Report Download - page 83

of 2007. Because the fair value of our trading securities is affected by market fluctuations that cannot be
predicted, we cannot estimate the impact of changes in the fair value of our trading securities for the full year.
Derivatives Fair Value Losses, Net
Table 9 presents, by type of derivative instrument, the fair value gains and losses, net on our derivatives.
Table 9 also includes an analysis of the components of derivatives fair value gains and losses attributable to
net contractual interest expense accruals on our interest rate swaps, terminated derivative contracts and
outstanding derivative contracts. The five-year interest rate swap rate is a key reference interest rate affecting
the estimated fair value of our derivatives. We present this rate as of the end of each quarter of 2006, 2005
and 2004 in the table below.
Table 9: Derivatives Fair Value Gains (Losses), Net
2006 2005 2004
For the Year Ended December 31,
(Dollars in millions)
Risk management derivatives:
Swaps:
Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,181 $ 549 $(10,640)
Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (390) (1,118) 3,917
Basis swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (2) 51
Foreign currency swaps
(1)
.......................................... 105 (673) 379
Swaptions:
Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,148) (1,393) (3,841)
Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,480) (2,071) (1,913)
Interest rate caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 283 (140)
Other
(2)
........................................................ 6 8 (22)
Risk management derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . (1,600) (4,417) (12,209)
Mortgage commitment derivatives fair value gains (losses), net
(3)
.............. 78 221 (47)
Total derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,522) $(4,196) $(12,256)
Risk management derivatives fair value gains (losses) attributable to:
Net contractual interest expense accruals on interest rate swaps . . . . . . . . . . . . . . . . . $ (111) $(1,325) $ (4,981)
Net change in fair value of terminated derivative contracts from end of prior year to
date of termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (176) (1,434) (4,096)
Net change in fair value of outstanding derivative contracts, including derivative
contracts entered into during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,313) (1,658) (3,132)
Risk management derivatives fair value losses, net
(4)
. . . . . . . . . . . . . . . . . . . . . . . $(1,600) $(4,417) $(12,209)
2006 2005 2004
5-year swap rate:
Quarter ended March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.31% 4.63% 3.17%
Quarter ended June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.65 4.15 4.30
Quarter ended September 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08 4.66 3.81
Quarter ended December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10 4.88 4.02
(1)
Includes the effect of net contractual interest expense of approximately $71 million for 2006. The change in fair value
of foreign currency swaps excluding this item resulted in a net gain of $176 million.
(2)
Includes MBS options, forward starting debt, forward purchase and sale agreements, swap credit enhancements,
mortgage insurance contracts and exchange-traded futures.
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