Freddie Mac 2015 Annual Report Download - page 189
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Risk Factors Interest Rate and Other Market Risks
Freddie Mac 2015 Form 10-K 187
affected by changes in spreads, especially results driven by financial instruments that are measured at
fair value, since we have limited ability to mitigate exposure to changes in spreads. These instruments
include trading securities, available-for-sale securities, loans held-for-sale, and loans and debt with the
fair value option elected.
A widening of the spreads on a given asset is typically associated with a decline in the fair value of that
asset, which may adversely affect our near-term financial results and net worth. While wider spreads may
create favorable investment opportunities, our ability to take advantage of any such opportunities is
limited due to various restrictions on our mortgage-related investments portfolio activities. See “MD&A -
Conservatorship and Related Matters - Limits on Our Mortgage-Related Investments Portfolio and
Indebtedness.”
A narrowing or tightening of the spreads on a given asset is typically associated with an increase in the
fair value of that asset. Narrowing spreads may reduce the number of attractive investment opportunities
in loans and mortgage-related securities, and could increase the cost of our activities to support the
liquidity and price performance of our PCs. Consequently, a tightening of the spreads on our assets may
adversely affect our future financial results and net worth.