Freddie Mac 2011 Annual Report Download - page 184

notes with original maturities of one year or less are classified as short-term debt. Medium-term notes typically contain
call provisions, effective as early as three months or as long as ten years after the securities are issued.
Reference Notes»Securities
Reference Notes»securities are regularly issued, U.S. dollar denominated, non-callable fixed-rate securities, which
we generally issue with original maturities ranging from two through ten years. Prior to 2005, we issued AReference
Notes»securities denominated in Euros, which remain outstanding. We hedge our exposure to changes in foreign-currency
exchange rates by entering into swap transactions that convert foreign-currency denominated obligations to U.S. dollar-
denominated obligations. See “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK —
Interest-Rate Risk and Other Market Risks — Sources of Interest-Rate Risk and Other Market Risks” for more
information.
Subordinated Debt
During 2011 and 2010, we did not call or issue any Freddie SUBS»securities. At December 31, 2011 and 2010, the
balance of our subordinated debt outstanding was $0.4 billion and $0.7 billion, respectively. Our subordinated debt in the
form of Freddie SUBS»securities is a component of our risk management and disclosure commitments with FHFA. See
“RISK MANAGEMENT AND DISCLOSURE COMMITMENTS” for a discussion of changes affecting our subordinated
debt as a result of our placement in conservatorship and the Purchase Agreement, and the Conservator’s suspension of
certain requirements relating to our subordinated debt. Under the Purchase Agreement, we may not issue subordinated
debt without Treasury’s consent.
Other Debt Retirement Activities
We repurchase, call, or exchange our outstanding medium- and long-term debt securities from time to time to help
support the liquidity and predictability of the market for our other debt securities and to manage our mix of liabilities
funding our assets. When our debt securities become seasoned or one-time call options on our debt securities expire, they
may become less liquid, which could cause their price to decline. By repurchasing debt securities, we help preserve the
liquidity of our debt securities and improve their price performance, which helps to reduce our funding costs over the
long-term. Our repurchase activities also help us manage the funding mismatch, or duration gap, created by changes in
interest rates. For example, when interest rates decline, the expected lives of our investments in mortgage-related
securities decrease, reducing the need for long-term debt. We use a number of different means to shorten the effective
weighted average lives of our outstanding debt securities and thereby manage the duration gap, including retiring long-
term debt through repurchases or calls; changing our debt funding mix between short- and long-term debt; or using
derivative instruments, such as entering into receive-fixed swaps or terminating or assigning pay-fixed swaps. From time
to time, we may also enter into transactions in which we exchange newly issued debt securities for similar outstanding
debt securities held by investors.
The table below provides the par value, based on settlement dates, of other debt securities we repurchased, called,
and exchanged during 2011 and 2010.
Table 68 — Other Debt Security Repurchases, Calls, and Exchanges
(1)
2011 2010
Year Ended December 31,
(in millions)
Repurchases of outstanding AReference Notes»securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 258 $ 262
Repurchases of outstanding medium-term notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,064 5,301
Calls of callable medium-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,489 256,256
Exchanges of medium-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 1,364
(1) Excludes debt securities of consolidated trusts held by third parties.
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