We transact most of our derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. We are not a derivatives dealer and do not trade derivatives for speculative purposes. We enter into derivative transactions through either of the following:

We use fair value hedges to manage our exposure to changes in the fair value of (1) a recognized asset or liability or (2) an unrecognized firm commitment, attributable to changes in a benchmark interest rate, such as the Secured Overnight Financing Rate (SOFR). We use the cash flow hedge strategy to hedge, on a "rolling" basis, our exposure to the variability in the net proceeds received from forecasted zero-coupon discount notes and the variability of cash flows associated with periodic SOFR-indexed bond issuances attributable to changes in the benchmark interest rate, by entering into interest rate swaps to mitigate such risks.

We may elect the fair value option for financial instruments, such as advances, MPF Loans held for sale, and consolidated obligation discount notes and bonds, in cases where hedge accounting treatment may not be achieved due to the inability to meet the hedge effectiveness testing criteria, or in certain cases where we wish to mitigate the risk associated with selecting the fair value option for other instruments. We may also use economic hedges to hedge securities in our trading portfolio, when hedge accounting is not permitted or hedge effectiveness is not achievable.

Over-the-counter (bilateral) Derivative Transactions: We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. For bilateral derivative agreements, the degree of counterparty risk depends on the negotiated provisions of such agreements to mitigate such risk, including, for example, terms related to master netting arrangements, collateral requirements and other credit enhancements. We manage counterparty credit risk through credit analysis, collateral requirements and adherence to the requirements set forth in our policies and FHFA regulations. We require collateral agreements on all over-the-counter derivatives.

As of June 30, 2025, based on credit analyses and collateral requirements, we have not recorded a credit loss on our over-the-counter derivative agreements. See Note 15 - Fair Value to the financial statements in our 2024 Form 10-K for discussion regarding our fair value methodology for over-the-counter derivative assets and liabilities, including an evaluation of the potential for the fair value of these instruments to be affected by counterparty credit risk.

We must exchange variation margin and, for transactions executed on or after September 1, 2022, two-way initial margin, with certain of our bilateral derivative transaction counterparties. Variation margin is exchanged daily based on the marked-to-market value of the underlying transactions, and is fully collateralized with a zero unsecured threshold. Initial margin is calculated daily based on the potential future exposure of the underlying transactions, and is collateralized when our aggregate bilateral derivative transaction exposure with a counterparty exceeds a specified threshold. Unlike variation margin, which is exchanged directly between counterparties, initial margin is held with a third-party custodian and does not change ownership. The party whose custodian is holding posted collateral (the pledgor) grants a security interest in the posted collateral to its counterparty and such counterparty, as the secured party, can only take ownership of the posted collateral upon the occurrence of certain events, including bankruptcy of the pledgor. As of June 30, 2025, we pledged no investment securities (that can be sold or repledged by a counterparty) for variation margin on our bilateral derivative transactions, and we did not pledge or receive initial margin with our bilateral derivative counterparties.

Cleared Derivative Transactions: Cleared derivative transactions are subject to variation and initial margin requirements established by the DCO and its clearing members. Variation margin payments are characterized as settlement of a derivative’s mark-to-market exposure and not as collateral against the derivative’s mark-to-market exposure. See Note 1 - Background and

Basis of Presentation and Note 2 - Summary of Significant Accounting Policies to the financial statements in our 2024 Form 10-K for further discussion. We post our initial margin collateral payments and make variation margin settlement payments through our FCMs, on behalf of the DCO, which could expose us to institutional credit risk in the event that the FCMs or the DCO fail to meet their obligations. Clearing derivatives through a DCO mitigates counterparty credit risk exposure because the DCO is substituted for individual counterparties and variation margin settlement payments are made daily through the FCMs for changes in the value of cleared derivatives. The DCO determines initial margin requirements for cleared derivatives. We pledged $822 million of investment securities (that can be sold or repledged) as part of our initial margin related to cleared derivative transactions at June 30, 2025. Additionally, an FCM may require additional initial margin to be posted based on credit considerations, including but not limited to, if our credit rating downgrades. We had no requirement to post additional initial margin by our FCMs at June 30, 2025.

The following table presents details on the notional amounts, and cleared and bilateral derivative assets and liabilities on our Condensed Statements of Condition. The netting adjustment amount includes cash collateral (either received or paid by us) and related accrued interest in cases where we have a legal right, by contract (e.g., master netting agreement) or otherwise, to offset cash flow obligations between us and our counterparty into a single net payable or receivable.


As of	June 30, 2025						December 31, 2024
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives in hedge accounting relationships-
Interest rate contracts	$	108,868	$	847	$	1,079	$	108,746	$	983	$	1,409
Derivatives not in hedge accounting relationships-
Interest rate contracts	6,484		17		4		13,744		100		12
Mortgage delivery commitments	238		1		1		115		—		—
Other	101		—		1		86		1		—
Derivatives not in hedge accounting relationships	6,823		18		6		13,945		101		12
Gross derivatives amount before netting adjustments and cash collateral	$	115,691	865		1,085		$	122,691	1,084		1,421
Netting adjustments and cash collateral			(852)		(1,008)				(1,066)		(1,394)
Derivatives on Condensed Statements of Condition			$	13	$	77			$	18	$	27
	Cash Collateral						Cash Collateral
Cash collateral posted and related accrued interest	$	547					$	826
Cash collateral received and related accrued interest	390						498


	Three months ended June 30,				Six months ended June 30,
For the periods ending	2025		2024		2025		2024
Economic hedges -
Interest rate contracts	$	(5)	$	6	$	(25)	$	20
Mortgage delivery commitments	2		(4)		6		(4)
Other	—		1		(2)		2
Economic hedges	(3)		3		(21)		18
Variation margin on derivatives	1		(1)		1		(1)
Noninterest income (loss) - Derivatives and hedging activities	$	(2)	$	2	$	(20)	$	17

The following tables present details regarding the offsetting of our cleared and bilateral derivatives on our Condensed Statements of Condition. The netting adjustment amount includes cash collateral (either received or paid by us) and related accrued interest in cases where, as applicable, we have a legal right, by contract (e.g., master netting agreement) or otherwise, to offset cash flow obligations between us and our counterparty into a single net payable or receivable.


	Derivative Assets
	As of June 30, 2025						As of December 31, 2024
	Bilateral		Cleared		Total		Bilateral		Cleared		Total
Derivatives with legal right of offset -
Gross recognized amount	$	824	$	40	$	864	$	1,032	$	52	$	1,084

Netting adjustments and cash collateral	(812)		(40)		(852)		(1,018)		(48)		(1,066)
Derivatives with legal right of offset - net	12		—		12		14		4		18
Derivatives without legal right of offset	1		—		1		—		—		—
Derivatives on Condensed Statements of Condition	13		—		13		14		4		18




Net amount	$	13	$	—	$	13	$	14	$	4	$	18


	Derivative Liabilities
	As of June 30, 2025						As of December 31, 2024
	Bilateral		Cleared		Total		Bilateral		Cleared		Total
Derivatives with legal right of offset -
Gross recognized amount	$	978	$	106	$	1,084	$	1,373	$	48	$	1,421

Netting adjustments and cash collateral	(968)		(40)		(1,008)		(1,346)		(48)		(1,394)
Derivatives with legal right of offset - net	10		66		76		27		—		27
Derivatives without legal right of offset	1		—		1		—		—		—
Derivatives on Condensed Statements of Condition	11		66		77		27		—		27
Less:

Noncash collateral received or pledged and can be sold or repledged	—		66		66		—		—		—

Net amount	$	11	$	—	$	11	$	27	$	—	$	27

At June 30, 2025 and December 31, 2024, we had $756 million and $805 million of additional credit exposure due to pledging of noncash collateral to our counterparties, which exceeded our net derivative position for combined cleared and bilateral derivatives. Separately, as of June 30, 2025 and December 31, 2024, we did not pledge or receive initial margin with our bilateral derivative counterparties.

The following table presents our fair value hedging results by the type of hedged item. We had no net gain or loss on hedged firm commitments that no longer qualified as a fair value hedge. Changes in the fair value of the derivative and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. Gains (losses) on derivatives include unrealized changes in fair value, as well as net interest settlements. The line for Other relates to discontinued closed fair value hedges on MPF Loans held for portfolio that are being amortized over the remaining life of the loans. As of June 30, 2025 we did not have any active fair value hedges on our MPF Loans.


	Three months ended June 30, 2025						Three months ended June 30, 2024
	Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income		Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income
Available-for-sale debt securities	$	(171)	$	268	$	97	$	176	$	(35)	$	141
Advances	(35)		131		96		132		$	59	191
Consolidated obligation bonds	43		(209)		(166)		(198)		$	(169)	(367)
Other	—		1		1		—		1		1
Total	$	(163)	$	191	$	28	$	110	$	(144)	$	(34)

	Six months ended June 30, 2025						Six months ended June 30, 2024
	Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income		Gain (Loss) on Derivative		Gain (Loss) on Hedged Item		Amount Recorded in Net Interest Income
Available-for-sale debt securities	$	(544)	$	738	$	194	$	793	$	(510)	$	283
Advances	(195)		389		194		654		(266)		388
Consolidated obligation bonds	221		(552)		(331)		(771)		35		(736)
Other	—		1		1		—		1		1
Total	$	(518)	$	576	$	58	$	676	$	(740)	$	(64)


As of June 30, 2025	Amortized cost of hedged asset/liability		Basis adjustments active hedges included in amortized cost		Basis adjustments discontinued hedges included in amortized cost		Total amount of fair value hedging basis adjustments
Available-for-sale securities	$	22,983	$	(1,209)	$	121	$	(1,088)
Advances	33,200		(162)		—		(162)
Consolidated obligation bonds	49,062		(834)		(9)		(843)
Other	133		—		2		2

As of December 31, 2024
Available-for-sale securities	$	21,195	$	(1,972)	$	146	$	(1,826)
Advances	33,947		(549)		—		(549)
Consolidated obligation bonds	47,670		(1,384)		(10)		(1,394)
Other	148		—		2		2

For cash flow hedges, the entire change in the fair value of the hedging instrument is recorded in accumulated other comprehensive income (loss) (AOCI) and reclassified into earnings (net interest income) as the hedged item affects earnings. Hedge effectiveness testing is performed to determine whether the hedge qualifies for hedge accounting.

We are exposed to the variability in the net proceeds received from forecasted zero-coupon discount notes, and the variability of cash flows associated with periodic SOFR-indexed bond issuances, which is attributable to changes in the benchmark interest rate. As a result, we enter into cash flow hedge relationships on a "rolling" basis utilizing interest rate swaps to mitigate such risks. The maximum length of time over which we are hedging this exposure is 15 years. We reclassify amounts in AOCI into our Condensed Statements of Income in the same periods during which the hedged forecasted transaction affects our earnings. We had no discontinued cash flow hedges for the periods presented. There were no deferred net gains (losses) on derivative instruments in AOCI that are expected to be reclassified to earnings during the next 12 months as of June 30, 2025.

The following table presents our cash flow hedging results by type of hedged item. Additionally, the table indicates where cash flow hedging results are classified in our Condensed Statements of Income. In this regard, the Amount Reclassified from AOCI into Net Interest Income column below includes the following:


	Three months ended June 30, 2025				Three months ended June 30, 2024
	Gross Amount Initially Recognized in AOCI		Amount Reclassified from AOCI into Net Interest Income		Gross Amount Initially Recognized in AOCI		Amount Reclassified from AOCI into Net Interest Income

Discount notes	$	(3)	$	3	$	5	$	10
Bonds	(6)		2		1		1
Total	$	(9)	$	5	$	6	$	11

	Six months ended June 30, 2025				Six months ended June 30, 2024
	Gross Amount Initially Recognized in AOCI		Amount Reclassified from AOCI into Net Interest Income		Gross Amount Initially Recognized in AOCI		Amount Reclassified from AOCI into Net Interest Income

Discount notes	$	(8)	$	10	$	23	$	21
Bonds	(20)		3		1		1
Total	$	(28)	$	13	$	24	$	22