- Fixed rate
- Early cancellation tied to LIBOR
- Generally used in a flat yield curve environment to obtain a lower cost of funds than Classic advances with a maturity equal to the lockout period.
- Fund short- or long-term assets.
- Available for terms out to 20 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
- 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.
- 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 and Solutions Guide . The rate on the new advance will be
that in effect at the time the new advance is taken.
- Funds are available two business days after the trade date.
- $2 million
minimum but smaller requests may be accommodated in special offerings.
- The Federal Home Loan Bank of Boston will make
its final pricing determination when the transaction
can be executed.
- 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
- 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.
- 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
- Interest is calculated on an actual/360-day basis.
- Prepayable at any time, subject to a fee, which
may be substantially greater than those associated
with Classic advances of the same maturity. Partial prepayments may be in amounts as small as $100,000 and in intervals of $100,000 thereafter.