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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 08/05/2011
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Table of Contents

matched, on average, over time and across interest rate scenarios to the estimated cash flows of our liabilities. A positive duration gap indicates that the duration of our assets exceeds the duration of our liabilities. We disclose duration gap on a monthly basis under the caption “Interest Rate Risk Disclosures” in our Monthly Summaries, which are available on our website and announced in a press release.
 
The sensitivity measures presented in Table 47, which we disclose on a quarterly basis as part of our disclosure commitments with FHFA, are an extension of our monthly sensitivity measures. There are three primary differences between our monthly sensitivity disclosure and the quarterly sensitivity disclosure presented below: (1) the quarterly disclosure is expanded to include the sensitivity results for larger rate level shocks of plus or minus 100 basis points; (2) the monthly disclosure reflects the estimated pre-tax impact on the market value of our net portfolio calculated based on a daily average, while the quarterly disclosure reflects the estimated pre-tax impact calculated based on the estimated financial position of our net portfolio and the market environment as of the last business day of the quarter; and (3) the monthly disclosure shows the most adverse pre-tax impact on the market value of our net portfolio from the hypothetical interest rate shocks, while the quarterly disclosure includes the estimated pre-tax impact of both up and down interest rate shocks.
 
In addition, Table 47 also provides the average, minimum, maximum and standard deviation for duration gap and for the most adverse market value impact on the net portfolio for non-parallel and parallel interest rate shocks for the three months ended June 30, 2011.
 
Table 47:  Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve(1)
 
                 
    As of
    June 30, 2011   December 31, 2010
    (Dollars in billions)
 
Rate level shock:
               
-100 basis points
  $ (0.4 )   $ (0.8 )
-50 basis points
    (0.1 )     (0.2 )
+50 basis points
    (0.1 )     (0.2 )
+100 basis points
    (0.3 )     (0.5 )
Rate slope shock:
               
-25 basis points (flattening)
    (0.1 )     (0.1 )
+25 basis points (steepening)
    0.1       0.1  
 
                         
    For the Three Months Ended June 30, 2011
    Duration
  Rate Slope Shock
  Rate Level Shock
    Gap   25 Bps   50 Bps
        Exposure
    (In months)   (Dollars in billions)
 
Average
    0.3     $ 0.1     $ 0.1  
Minimum
                 
Maximum
    0.7       0.2       0.3  
Standard deviation
    0.2             0.1  
 
 
(1) Computed based on changes in LIBOR swap rates.
 
A majority of the interest rate risk associated with our mortgage-related securities and loans is hedged with our debt issuance, which includes callable debt. We use derivatives to help manage the residual interest rate risk exposure between our assets and liabilities. Derivatives have enabled us to keep our interest rate risk exposure at consistently low levels in a wide range of interest-rate environments. Table 48 shows an example of how derivatives impacted the net market value exposure for a 50 basis point parallel interest rate shock.


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