Freddie Mac 2004 Annual Report Download - page 124

Table 55 provides a summary of the contractual terms of our pay-Ñxed and receive-Ñxed swaps. This
table provides information about the eÅect of interest-rate swaps on net interest yield if the derivative is in a
fair value or cash Öow hedge relationship. If the derivative is classiÑed as no hedge designation, the derivative
does not aÅect our net interest yield, but rather is reported in Derivative gains (losses) on our consolidated
statements of income.
Table 55 Ì Contractual Terms of Pay-Fixed and Receive-Fixed Swaps
December 31, 2004
Pay-Fixed/ Receive-Fixed/
Receive-Variable Pay-Variable
Notional Pay Rate Receive Rate(1) Notional Pay Rate(1) Receive Rate
(dollars in millions)
Swaps
Maturity less than 1 yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,282 2.34% 2.19% $11,032 3.48% 2.17%
Maturity 1 to 3 years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,703 3.84 2.38 24,581 3.92 2.20
Maturity greater than 3 and up to 5 yearsÏÏÏ 15,147 3.99 2.37 15,751 3.67 2.22
Maturity in excess of 5 years ÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,205 4.91 2.30 32,238 5.19 2.22
Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,337 83,602
Forward-starting swaps(2)
Maturity greater than 3 and up to 5 yearsÏÏÏ 1,625 3.73 Ì Ì Ì Ì
Maturity in excess of 5 years ÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,081 6.20 Ì Ì Ì Ì
Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43,706 Ì
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $95,043 $83,602
December 31, 2003
Pay-Fixed/ Receive-Fixed/
Receive-Variable Pay-Variable
Notional Pay Rate Receive Rate(1) Notional Pay Rate(1) Receive Rate
(dollars in millions)
Swaps
Maturity less than 1 yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,900 5.76% 1.18% $ 21,106 1.40% 2.38%
Maturity 1 to 3 years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,073 2.69 1.17 18,247 1.73 3.88
Maturity greater than 3 and up to 5 yearsÏÏÏ 15,967 3.63 1.17 11,249 1.99 3.99
Maturity in excess of 5 years ÏÏÏÏÏÏÏÏÏÏÏÏÏ 65,395 4.91 1.17 24,202 1.66 5.64
Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 117,335 74,804
Forward-starting swaps(2)
Maturity 1 to 3 years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 8,520 Ì 2.83
Maturity greater than 3 and up to 5 yearsÏÏÏ 220 4.49 Ì 3,260 Ì 3.21
Maturity in excess of 5 years ÏÏÏÏÏÏÏÏÏÏÏÏÏ 62,196 6.11 Ì 20,833 Ì 5.07
Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62,416 32,613
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $179,751 $107,417
(1) The weighted-average rate payable and receivable is as of the date indicated. Because the rates of the swaps are Öoating, these rates will
change as prevailing interest rates change. The variable legs of these swaps are generally based on LIBOR or Euro Interbank OÅered Rate.
(2) Represents interest-rate swap agreements scheduled to begin on a future date. Generally, the interest rate associated with the variable leg of
the swap is set when the Ñrst payment cycle begins and is periodically reset thereafter.
Measurement of Interest-Rate Risk
We measure our exposure to key interest-rate risks every day against both internal management limits
and limits set by the Board of Directors. Throughout 2004 our interest-rate risk remained low and well below
management and Board limits.
PMVS and Duration Gap. Our interest-rate sensitivity disclosures provide a set of management
estimates that convey a useful assessment of the amount of our interest-rate risk at a given point in time. This
section describes our primary interest-rate risk measures: PMVS and duration gap. PMVS is measured in two
ways, one measuring the estimated sensitivity of our portfolio market value (as deÑned below) to parallel
moves in interest rates (PMVS-L) and the other to nonparallel movements (PMVS-YC). We calculate
PMVS-L and PMVS-YC every business day. PMVS-L and PMVS-YC are based on the assumption of
instantaneous yield curve shifts; therefore neither measure includes the eÅect on fair value of any rebalancing
actions that we would typically take to reduce our risk exposure.
Freddie Mac
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