FHLBanks Launch New Internet-Based Discount Note Auctions

January 11, 2000

Successful Sale Totals Over $2.4 billion

Pittsburgh, PA (January 11, 2000) — The Federal Home Loan Bank System, the nation’s largest source of home mortgage credit, today launched their first ever competitive discount note auction over the internet. Using a customized platform created by AgencyAuction, a unit of MuniAuction, Inc., the 15 member Selling Group today agreed to purchase $2.45 billion in discount notes in four different maturities. The results of this auction are shown below:

Maturity Maturity Date Average Rate % Par Amount $
4 week 2/09/00 5.515 1,400,000,000
9 week 3/15/00 5.642 350,000,000
13 week 4/12/00 5.698 495,000,000
26 week 7/12/00 5.797 205,000,000

Participation in this auction was strong, with all members of the Selling Group submitting substantial bids. AgencyAuction functioned well, as expected, after extensive testing. For this auction, 187 separate bids were submitted totaling 8.2 times the amount offered for sale for the four available maturities. These bids were confirmed and the auction was executed at 12:00 noon, on schedule. The winning bids were calculated and the appropriate dealers were notified in minutes, eliminating the tedious series of phone calls that were formerly necessary, and providing the market with more timely information. Dealer reaction was positive. “The Home Loan’s first internet auction went extremely smoothly” said Robin Taylor, Senior Vice President at PaineWebber, and a participant in today’s auction. “It was because of all the practice the dealers were given, and the attention to detail”.

FHLBanks have a long history of leadership in using discount note issuance to fund member loan demand. In 1995, the FHLBank System was the first Government Sponsored Enterprise (GSE) to issue discount notes via auction, and since then has been the largest, most consistent GSE DN issuer. In 1999, 60% of FHLBank term DNs were offered via auction, with these four maturities totaling over $328 billion, in more than 4,500 separate transactions.

These documents, along with details of auction results, can be viewed on the Office of Finance website www.fhlb-of.com, both in the Main Menu and under “News and Analysis”. The FHLBank Discount Note Program represents an important source of funding used by the Federal Home Loan Bank System members for housing and economic development.

Categories: Auctions