| Key Features |
- Fixed rate
- Nonamortizing
- Early cancellation tied to LIBOR
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| Common Uses |
- Macrofund balance sheet.
- Fund specific assets.
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| Maturities |
- Typically one to 15 years, but always with the condition
that the advance will be terminated prior to final maturity if
LIBOR equals or exceeds a specified strike rate on a specified
date. (LIBOR is the London Interbank Offered Rate, which refers
to the rates that most major international banks dealing in Eurodollar
currency charge each other for large loans.)
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| Lockout Periods |
- A Knockout advance is offered with an initial lockout period
during which the advance will not be terminated.
- You may choose a lockout period of three months to 10 years.
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| Cancellation |
- After the initial lockout period, the Federal Home Loan Bank
of Boston will automatically cancel the advance on any specified
cancellation date if LIBOR is equal to or greater than a predetermined
"strike rate" four London business days prior to the
scheduled cancellation date.
Some Knockout advances are offered with only one cancellation
date. Others are offered with a series of cancellation dates at
regular intervals, usually quarterly.
If the Knockout Advance is cancelled, you must repay the advance, but you may replace the advance with a new advance. The new advance
may be for any structure and term to maturity agreed upon between
you and the Bank, subject to the Bank's Products
Policy. The rate on the new advance will be that in effect
at the time the new advance is taken.
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| Availability |
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| Disbursement |
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| Offering Size |
- Orders for Knockout advances of less than $10 million will
be aggregated with other requests for advances with identical
terms and will be executed when orders total $10 million.
- The Federal Home Loan Bank of Boston will make its final pricing
determination when the transaction can be executed.
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| Risks |
- Since they may be canceled before final maturity, Knockout advances
require careful risk analysis and active liability management.
The advance has features similar to an option.
- The Federal Home Loan Bank of Boston does not act as a financial
adviser, and members should independently evaluate the suitability
and risks of these advances. Please see the Knockout
Advance Primer for a discussion of the risks and other considerations
associated with the Knockout advance.
- We encourage you to review the risks and rewards of these advances
and to consult your investment advisors about investment strategies
that suit your risk profile and liability-management policies.
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| Payment of Principal and
Interest |
- Principal due at maturity and interest due monthly on the second
business day of the month.
- If canceled, principal and interest are due on the cancellation
date.
- Interest is calculated on an actual/360-day basis.
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| Member-Initiated Prepayment |
- Prepayable at any time, subject to a fee, which may be substantially
greater than those associated with Classic advances of the same
maturity.
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| More Information |
- For details on the terms and conditions of the Knockout advance,
consult the application form, which is available from the Money
Desk at moneydesk@fhlbboston.com
or 1-800-357-3452.
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