How to use the Symmetrical Prepayment Advance

last updated on Thursday, March 5, 2026 in Advances

Symmetrical Prepayment Feature Overview

The Symmetrical Prepayment Feature is an optional add-on available for any plain-vanilla, fixed-rate bullet or amortizing advance with Federal Home Loan Bank of Des Moines (the Bank) that has a term of one year or longer. When included, the feature provides the potential to receive a prepayment credit if the advance is prepaid in certain market conditions before maturity. 

The cost to add this feature is five basis points, with a minimum amount of $1 million and a term to maturity between one and 10 years. The Symmetrical Prepayment Feature cannot be used in combination with a Community Investment Advance or a Forward Start Advance.

How the Symmetrical Prepayment Feature Works (Table 1)

Table 1 compares a standard 5-year, $1 million fixed-rate bullet advance with and without the Symmetrical Prepayment Feature. In flat or declining rate environments, prepayment fees for both structures remain highly correlated, with the only difference attributable to the five-basis-point premium for the Symmetrical Prepayment Feature.

Prepayment fees for any FHLB Des Moines advance are calculated using the present value of remaining cash flows owed to the Bank. When rates fall, these prepayment fees naturally increase.

The value of the Symmetrical Prepayment Feature emerges in rising-rate environments. As the market value of the advance declines, the feature allows the member to receive a prepayment credit equal to the difference between the market value and the outstanding principal. 

For example, if advance rates rise by 100 basis points in an instantaneous and parallel fashion, the market value of a $1 million advance may decline to $965,904, resulting in a prepayment credit of $34,096.

Without the Symmetrical Prepayment Feature, the member would simply repay the outstanding principal with no credit.

Strategic Uses of the Symmetrical Prepayment Feature

The Symmetrical Prepayment Feature is well-suited for funding a variety of balance-sheet assets and managing interest rate risk, including:

• Investment portfolios: As interest rates rise, portfolio values generally fall. Gains realized through a Symmetrical advance in the same environment can help offset these losses, providing a natural hedge.
• Loan portfolios: When used to fund loan assets, the Symmetrical Prepayment Feature provides the same interest rate protection as a standard bullet or amortizing advance. However, if loans prepay and the funding is no longer needed, a rising-rate environment may produce a prepayment credit, reducing the cost of retiring the advance.

Given its minimal cost, the Symmetrical Prepayment Feature can be a valuable enhancement to eligible advances. It introduces limited risk in flat or declining rate environments while offering meaningful potential benefit if rates rise. 

For guidance on whether the Symmetrical Prepayment Feature is appropriate for your institution’s funding strategy, contact your relationship manager or the Member Strategies Team.

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