Notes From the Funding Desk: Advance Specials Extended Through September 30

June 24, 2021

Federal Home Loan Bank of Chicago (FHLBank Chicago) members continue to find value in borrowing longer-term fixed-rate advances in today’s low interest rate environment. In our on-going commitment to support your liquidity needs, we are extending our long-term discounts special through September 30, 2021.

Members have taken advantage by pairing these advances with long-term fixed rate assets or for general asset liability management. For example, a couple of our participating members have told us:

  • “We are borrowing longer-term advances from FHLBank Chicago to support our commercial and residential loan portfolio. We appreciate the 5 basis point special because every dollar helps!” - River Bank, La Crosse, WI
  • “FHLBank Chicago is a valued partner that provides us with a variety of funding options to help us manage our funding costs in a changing rate environment. Their 5 basis point rate special on a forward starting advance helped us protect our cost of funding against future rate increases.” - Bankers’ Bank, Madison, WI

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Top Member Strategies That Benefit From Our Advance Specials

  • Investment Leverage – Match funding long-term fixed-rate securities such as mortgage-back securities (MBS), commercial mortgage-back securities (CMBS), municipal, and corporate bonds is a popular strategy with many of our members. Additionally, some members take our fixed-rate advance, swap it to floating, and match fund a floating rate security. The matched cash flows under this special help generate locked-in spread income to support net interest margin (NIM), enabling you to hedge interest rate risk and benefit from asset duration.
  • CRE and Multi-family Loan Leverage – Our depository members actively utilize advances under these specials to fund long-term prepay protected commercial real estate (CRE) and multi-family loans. Safeguard your liquidity for the life of the loans through amortizing or fixed-rate advances with the specials to capture a stable NIM.
  • Forward Start Advances to Roll Upcoming Maturities – Capture today’s low rates for tomorrow’s needs. Many of our members used these specials to forward start an advance on the date of an upcoming funding maturity, and ensure liquidity for the future.
  • Extend Liability Duration to Help with ALM – Execute longer-term advances under these specials to increase liability duration. Members have taken advantage of the funding specials to create a more asset sensitive balance sheet. Let us help you meet your asset liability management (ALM) goals.

How to Transact

Terms and conditions are subject to change and are updated here. These advance specials are not eligible for RCAP.

Current advance rates pre-discount can be found on the daily rate sheet. To execute, you must call the Member Transaction Desk at 855.345.2244, option 1. Advances executed on eBanking are not eligible for the pricing discount.

Members can also add the symmetrical prepay feature to the advances, which allows them to prepay the advance and monetize their gains if rates rise by a sufficient amount.

Other Pricing Special Reminders

The early bird catches the worm! We summarized other pricing specials on select short-term advances transacted by 10 a.m. You can review the details in our Notes from the Funding Desk from March 4, 2021.

Questions?

Please reach out to me with any questions.

Contact your Sales Director for more information.

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