Fannie Mae Benchmark Bill program

Benchmark Bills® Through this program, Fannie Mae issues short-term notes in three- and six-month maturities on a set weekly auction schedule and one-year maturity on a set monthly auction schedule. While Benchmark Bills are a component of the regular Discount Notes program, they are unlike Discount Notes in that they are issued via a Dutch auction process using Web-based technology. The auction process creates greater price transparency in the primary market while the larger size of each issue adds secondary market liquidity for the benefit of investors. This system has improved market efficiencies as results are posted on a variety of electronic information sources (our Web site, Reuters, Knight Ridder, and Telerate) within a few minutes of the final outcome. As with Discount Notes, the Benchmark Bills program is conducted through the same group of dealers. Auction bids are obtained via the Internet, and the results of the auction are also announced through the Internet. By working with a designated group of dealers, Fannie Mae ensures an active secondary market for Benchmark Bills. Investors in Benchmark Bills receive the benefit of increased liquidity that only a dealer group can provide. Dealers submit bids either on behalf of investors or for their own accounts. Bids on behalf of investors may be competitive or noncompetitive, with noncompetitive bids allowed up to a maximum of 20 percent of a transaction. Settlement occurs on Wednesday (cash settlement) or on Thursday (regular settlement) at the option of the investor. Discount Notes and Benchmark Bills are considered acceptable collateral for margin deposits at various exchanges and clearing corporations. In certain instances, Discount Notes and Benchmark Bills are acceptable investments for escrow accounts associated with municipal bond offerings. In addition, Discount Notes and Benchmark Bills, like most other Fannie Mae debt products, are eligible as collateral in repurchase transactions entered into with the Federal Reserve Banks.