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Callable Debt Securities
Callable debt is one of the most important financial tools Fannie Mae uses to match the duration of its liabilities to that of its mortgage assets when mortgages prepay. By issuing callable debt, the company gains protection against declining interest rates that tend to cause the mortgage assets of the portfolio to prepay more quickly. Fannie Mae can then redeem the company's currently callable debt to match the liquidations of the company's mortgage assets, thus keeping the duration of the company's assets and liabilities closely in line. For investors looking to gain a potentially higher yield over noncallable debt securities while maintaining outstanding credit quality, Fannie Mae callable debt may provide an appealing alternative. Callable debt securities offer the potential for attractive rates of return on an absolute basis as well as relative to other fixed-income securities. An Introduction to Callable Debt Securities (PDF) provides a detailed explanation of Fannie Mae's callable debt issuance, illustrates the valuation of callable debt and discusses who buys callable debt and why.
The AOAS Pricing Model Tutorial (PDF) provides access to an overview of the SIFMA guidelines for pricing and trading European (one-time call) callable U.S. agency debt securities, including qualifying Fannie Mae callable debt securities.
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Last Revised: June 16, 2009
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This document is for information purposes
only. It is neither an offer to sell nor a
solicitation of an offer to buy any Fannie
Mae security. Fannie Mae securities are offered
only in jurisdictions where permissible by
offering documents available through qualified
dealers. Securities issued by Fannie Mae are
not guaranteed by the United States and do
not constitute a debt or obligation of the
Unites States or of any agency or instrumentality
thereof other than Fannie Mae. All statements
made herein are qualified in their entirety
by reference in the applicable offering documents.
Securities discussed herein may not be eligible
for sale in certain jurisdictions or to certain
persons and may not be suitable for all types
of investors. An offering only may be made
through delivery of the Offering Document.
Investors considering purchasing a Fannie
Mae security should consult their own financial
and legal advisors for information about such
security, the risks and investment considerations
arising from an investment in such security,
the appropriate tools to analyze such investment,
and the suitability of such investment in
each investor's particular circumstances.
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An Introduction to Callable Debt Securities