Notes From the Funding Desk: New Discount on Callable Advance Structures and Long-Term Discounts Extended through December 31

September 23, 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 ongoing commitment to support your liquidity needs, we are adding a special on Callable Fixed Rate advance structures and simplifying and extending our long-term discounts. All discounts are available October 1 through December 31, 2021.

We are making two changes to expand our existing five basis point (bps) discount program:

  • We are expanding our discounts to fixed-rate callable advances with a minimum lockout of one year.
  • We are removing the ladder discount but instead broadening the discount on Fixed-Rate, Fixed-Term Advances by reducing the minimum principal amount to $1 million and the minimum term to one year.

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.

Top Member Strategies That Benefit From Our Advance Specials

The discounted advances paired with lower “all-in” costs due to the Dividend Effect remain among the cheapest sources of term wholesale funding, even as competing funding sources have recently become more expensive in the belly and long-end of the curve. Members continue to find value in longer-term advances pairing the funding with various strategies including but not limited to those outlined below:

  • NEW Add Call Protection to Hedge Mortgage Portfolios – The fixed-rate callable advances structure gives members the option to cancel an advance. This is an excellent tool to hedge prepay risk inherent in residential mortgage assets. Callable advances are available with both Bermudan (quarterly) and European (single-date) option structures.
  • 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 floating rate securities such as collateralized loan obligations (CLOs), collateralized mortgage obligations (CMOs), and FFELP Student Loans. 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 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.

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.


Please reach out to your Sales Director with any questions.

Contact your Sales Director for more information.

*Required Fields