Fannie Mae 2009 Annual Report Download - page 187

mortgage index as calculated by Barclays Capital is both higher and more volatile than our duration gap. This
difference is attributable to several factors, including the following:
(1) We use duration hedges, including longer term debt and interest rate swaps, to reduce the duration of our
net portfolio.
(2) We use option-based hedges, including callable debt and interest rate swaptions, to reduce the convexity or
the duration changes of our net portfolio as interest rates move.
(3) We take rebalancing actions to adjust our net portfolio position in response to movements in interest rates.
(4) Our mortgage portfolio includes not only 30-year fixed rate mortgage assets, but also other mortgage
assets that typically have a shorter duration, such as adjustable-rate mortgage loans, and mortgage assets
that generally have a somewhat longer duration, such as multifamily loans and CMBS.
(5) The models used by Barclays Capital and Fannie Mae to estimate durations are different.
Table 55: Duration Gap
Month
Fannie Mae
Effective
Duration Gap
30-Year Fannie Mae
Mortgage Index
Option Adjusted
Duration
(1)
(In months)
December2008.......................................... (1) 21
January 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13
February 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 30
March 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 26
April 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 23
May2009.............................................. 1 30
June2009.............................................. 1 41
July 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 40
August2009............................................ — 41
September2009.......................................... (2) 39
October 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 40
November2009.......................................... — 38
December2009.......................................... 1 40
January 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 43
(1)
Reflects average daily option-adjusted duration, expressed in months, based on the 30-year Fannie Mae MBS
component of the Barclays Capital U.S. Aggregate index obtained from Barclays Capital Live.
Other Interest Rate Risk Information
The interest rate risk measures discussed above exclude the impact of changes in the fair value of our net
guaranty assets resulting from changes in interest rates. As previously noted, we exclude our guaranty business
from these sensitivity measures based on our current assumption that the guaranty fee income generated from
future business activity will largely replace guaranty fee income lost due to mortgage prepayments that result
from changes in interest rates.
We provide additional interest rate sensitivities below in Table 56, including separate disclosure of the
potential impact on the fair value of our trading assets, our net guaranty assets and obligations, and our other
financial instruments for the periods indicated, from the same hypothetical changes in the level of interest
rates as presented above in Table 54. We also assume a parallel shift in all maturities along the interest rate
swap curve in calculating these sensitivities. We believe these interest rate changes represent reasonably
possible near-term changes in interest rates over the next twelve months.
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