The primary purpose of the Federal Home Loan Banks (FHLBs) is to provide members with liquidity. FHLBs offer a variety of credit products known as “advances” to meet the short- and long-term liquidity needs of their members.

The Federal Housing Finance Agency (FHFA) regulates the FHLBs. It is responsible for ensuring that the FHLBs operate in a safe and sound manner, are adequately capitalized, are able to raise funds in the capital mar- kets, and are held accountable to the FHLBs’ mission.

​The Federal Home Loan Bank System. The Federal Home Loan Bank System was created by the Federal Home Loan Bank Act as a government sponsored enterprise to support mortgage lending and related community investment. Each FHLBank is a separate, government-chartered, member-owned corporation.

What is the Federal Home Loan Bank Act? The Federal Home Loan Bank Act was passed during the Hoover administration in 1932. It was designed to encourage home ownership by providing a source of low-cost funds for member banks to use in extending mortgage loans.

The 11 FHLBanks include:

• Federal Home Loan Bank of Atlanta.
• Federal Home Loan Bank of Boston.
• Federal Home Loan Bank of Chicago.
• Federal Home Loan Bank of Cincinnati.
• Federal Home Loan Bank of Dallas.
• Federal Home Loan Bank of Des Moines.
• Federal Home Loan Bank of Indianapolis.
• Federal Home Loan Bank of New York.

Current Rates

Fixed-Rate Advances

FHLB Rate means a fixed rate of interest determined by Lender based upon the Amortizing Advance Rate offered by the Federal Home Loan Bank of New York for instruments having a term of five-year/five-year amortization (or for remaining amortization) most recently available on the day which is two (2) Business Days …

30-day LIBOR means the rate determined by the Lender for any date of determination as the rate for deposits for a period of thirty days in U.S. Dollars which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two London Banking Days preceding that date of determination.

Why is LIBOR being phased out? After the 2008 Financial Crisis, interbank lending and borrowing began to decline as banks looked for other means to obtain financing. In addition, due to the inaccurate reporting of interest rates by some banks to ICE, LIBOR became vulnerable to rate manipulation and eroding credibility.

The Financial Stability Board (FSB) published a set of documents to support a smooth transition away from LIBOR by the end of 2021 for financial and non-financial sector firms, as well as authorities, to consider.

Why does LIBOR need to be replaced? The underlying market that LIBOR is derived from is no longer used in any significant volume. Therefore, the submissions made by banks to sustain the LIBOR rate are often based (at least in part) on expert judgement rather than actual transactions.

Although generally correlated, historical comparison of the two rates demonstrates that generally SOFR is lower than LIBOR. Both benchmark rates can be hedged using interest rate swaps.

LIBOR will disappear at the end of 2021 and most UK lenders are transitioning to a new “risk free rate” known as SONIA, the “sterling overnight index average”.

SONIA does not include a term bank credit risk component so is a better measure of the general level of interest rates than LIBOR. SONIA can be compounded to be used in term contracts. Referencing alternatives such as SONIA is the most effective way of avoiding risks related to LIBOR discontinuation.

The rate conventions are: annualised rate, act/365, four decimal places. In 2018, SONIA (floating rate) bonds accounted for 20.7 per cent share of UK issuance compared to 48.1 per cent share of Interbank Offered Rate (floating rate) bonds.

SONIA is calculated as the trimmed mean, rounded to four decimal places, of interest rates paid on eligible sterling-denominated deposit transactions. This trimmed mean is calculated as the volume-weighted mean rate, based on the central 50% of the volume-weighted distribution of rates.

SONIA (Sterling Over Night Indexed Average) is an overnight rate, set in arrears and based on actual transactions in overnight indexed swaps for unsecured transactions in the Sterling market. SONIA is a risk-free rate meaning no bank credit risk is included.

Overview. SONIA (Sterling Overnight Index Average) is an important interest rate benchmark. We are the administrator for SONIA. That means we take responsibility for its governance and publication every London business day.

The Sterling Overnight Index Average, or SONIA, is an index of very short-term unsecured loans among and between U.K. financial institutions. Launched in 1997, several changes made in 2017 and 2018 have led the SONIA rate to be the preferred risk-free benchmark interest rate by U.K. securities dealers.