A small number of well-rated banking counterparties will have profited from the upsurge in derivatives-based hedging activity undertaken by Freddie Mac and Fannie Mae.

Last year, the two triple-A rated US-based government-sponsored mortgage refinancing agencies saw a massive increase in derivatives trading. By the end of last year Fannie Mae's notional derivatives exposure had grown to $766m (&euro873m), up from $182m at the end of 2000. Meanwhile, the total notional value of Freddie Mac's derivatives position had increased to more than $1trillion in 2001 - up 120% from the previous year, making it what many believe to be the largest single counterparty in derivatives.