1. 50% allocation to the six-month maturity SOFR-Indexed Advance:
The advance rate resets daily at the current SOFR Index plus the spread of 25 bps, which is determined at initiation and is fixed for the life of the advance.
2. 25% allocation to the DNA-Floater Advance with a one-year maturity that resets monthly:
This advance reprices every month at a spread on top of the Office of Finance four-week discount note auction. Additionally, members can prepay the advance with no fee at every monthly reset, offering useful flexibility to pay down the advance if needed.
3. 25% allocation to the 12-month Classic Advance:
This offers some relative value as the fixed-rate advance curve is inverted out to one year.
As shown below, the result is that the combined funding reprices every 3.27 months but has a final maturity that is longer than that at nine months. Additionally, because of the flexibility afforded by the DNA-Floater Advance to prepay, the average life can be shorter than the maturity when it’s beneficial to the member to utilize that option. The blended cost for this combination is 0.35%, which is below that of the Classic Advance curve inside of nine months. Using the various advance solutions available when market conditions present opportunities can allow for members to tailor the interest-rate and liquidity risk that fits their balance sheet and reduces interest costs as well.