Company: AGM-PH
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0000845877-25-000204
Chunk: 322

Company: FEDERAL AGRICULTURAL MORTGAGE CORP
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 2
Chunk 322
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 Farmer Mac maintained a positive effective duration gap of 3.7 months, which was relatively unchanged compared to December 31, 2024. Since the end of 2024, the yield curve has declined, with the yields on the 2‑year and 10‑year U.S. Treasury Notes falling by approximately 52 and 34 basis points, respectively. This change in interest rates resulted in a relatively similar decline in the duration of Farmer Mac’s funded assets, liabilities, and financial derivatives.

Financial Derivatives Transactions

The economic effects of financial derivatives are included in Farmer Mac's MVE, NES, and duration gap analyses. Farmer Mac typically enters into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of interest-earning assets, future cash flows, and debt issuance, and not for trading or speculative purposes:

•"pay-fixed" interest rate swaps, in which Farmer Mac pays fixed rates of interest to, and receives floating rates of interest from, counterparties;

•"receive-fixed" interest rate swaps, in which Farmer Mac receives fixed rates of interest from, and pays floating rates of interest to, counterparties;

•"basis swaps," in which Farmer Mac pays floating rates of interest based on one index to, and receives floating rates of interest based on a different index from, counterparties; and

•exchange-traded futures contracts involving U.S. Treasury securities.

As of June 30, 2025, Farmer Mac had $24.1 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to approximately thirty years, of which $10.7 billion were pay-fixed interest rate swaps, $12.8 billion were receive-fixed interest rate swaps, and $0.6 billion were basis swaps.

Farmer Mac enters into interest rate swaps to more closely match the cash flow and duration characteristics of its interest-earning assets with those of its debt. For example, Farmer Mac transacts pay-fixed interest rate swaps and issues floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded. Farmer Mac evaluates the overall cost of using interest rate swaps in conjunction with debt issuance as a funding alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet. 

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Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as available-for-sale or liabilities to protect against fair value changes in the