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Derivatives

U.S. Farm Financier Partially Converts Fixed-Rate Bond

The Federal Farm Credit Banks Funding Corporation (FFCB) has entered an interest rate swap to convert part of a recent USD1 billion fixed-rate bond into a synthetic floater. An FFCB official in Jersey City, N.J., said the swap was executed to hedge interest rate risk as well as to match the resetting nature of a significant portion of the agency's assets. He declined to specify what portion of the bond issue has been included in the swap.

FFCB pays a LIBOR-based floating rate and receives the 2.5% coupon. The swap mirrors the three-year maturity of the bond. The official declined to name the counterparty on the swap. Lehman Brothers and Merrill Lynch lead managed the bond deal.

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