National Rural Responds to Fitch Announcement

HERNDON, VA, Jul 10 (MARKET WIRE) --
Today Fitch Ratings (Fitch) announced that it has placed the ratings of
National Rural Utilities Cooperative Finance Corporation (National Rural)
(NYSE: NRU) (NYSE: NRN) (NYSE: NRC) on Rating Watch Negative.

In the announcement, Fitch highlighted the following items that have
caused them to take this action:

-- National Rural's funding profile has migrated towards a higher
reliance on secured funding, thereby reducing the available collateral
supporting unsecured creditors.

-- National Rural's leverage ratios remain elevated relative to
historical measures.

-- National Rural has a sizable ($1.2 billion) amount of debt maturing in
August 2009.

In the announcement, Fitch acknowledged that partially offsetting their
concerns are National Rural's solid asset quality, consistent operating
performance and vital role in supplementing the credit programs of the
U.S. Department of Agriculture's Rural Utilities Service by funding rural
utility cooperatives.

National Rural plans to meet soon with Fitch to provide information it
believes will mitigate the concerns highlighted in its announcement.

The following represents National Rural's position with respect to the
concerns raised by Fitch.

FUNDING PROFILE

Based upon preliminary and unaudited amounts at May 31, 2009, National
Rural had 34 percent of its combined long- and short-term debt
collateralized by loans and there was an additional 17 percent of total
debt for which loans were held on deposit. However, 86 percent of National
Rural's loans to members were also secured by utility assets. National
Rural believes the amount of secured, high quality assets available to
support its unsecured debt is significant and provides strong protection
to these investors.

The public utility sector continues to thrive, as Fitch itself noted in
its mid-year report last month. This fact has been confirmed in similar
reports from Moody's and Standard & Poor's. The strength of utilities is
particularly evident in the electric cooperative sector, which continues
to demonstrate consistently solid financial results even during the
current economic downturn. As a result of the increased utilization of
secured debt funding, National Rural has been able to reduce its funding
costs.

LEVERAGE RATIO

National Rural has taken several recent steps to improve its leverage
ratio. In December 2008, it initiated an effort to increase member
investments in National Rural through the issuance of member capital
securities, which are long-term, subordinated instruments. As of today,
National Rural has issued $317 million of member capital securities. The
member capital securities, as well as the other subordinated investments,
are treated as capital for financial covenant purposes and rank behind
senior secured and unsecured debt. Based upon preliminary and unaudited
amounts at May 31, 2009, National Rural had $311 million in subordinated
deferrable debt and $1,740 million of member subordinated investments
outstanding.

National Rural also recently announced revisions to its guidelines related
to the timing and amount of its patronage capital to be distributed. The
purpose of the revision, which was approved by National Rural's Board of
Directors, is to continue strengthening the equity position of National
Rural. Under the new guidelines, National Rural will retire 50 percent of
prior year's allocated margins and hold the remaining 50 percent for 25
years.

Prior to this recent revision to the patronage capital policies, National
Rural had historically retired 70 percent of the prior year's allocated
margins and held the remaining 30 percent for 15 years. The annual
patronage capital allocation and retirement amounts remain subject to
annual approval by National Rural's Board of Directors. National Rural has
no obligation to retire patronage capital.

LIQUIDITY

Based upon preliminary and unaudited amounts at May 31, 2009, National
Rural had $505 million of cash and cash equivalents on hand, $1.6 billion
of unutilized commercial paper capacity, and $1.2 billion of capacity
under the revolving debt arrangement with Farmer Mac. National Rural also
obtains liquidity through approximately $1 billion per year of principal
repayments of long-term loans from borrowers.

In addition, National Rural can raise debt through its InterNotes and
medium term note programs and may offer additional collateralized debt
bonds on short notice as a "well known seasoned issuer." National Rural
has experienced a significant recent increase in demand for InterNotes
and, to date, has issued approximately $766 million of InterNotes in
2009. The combination of all of these factors results in National Rural
being fully confident in its ability to refinance the $1.2 billion of
debt maturing in August 2009.

National Rural's Governor and CEO Sheldon Petersen said, "National Rural
has consistently shown its ability to raise funds through a variety of
sources while balancing the needs of its members with the interests of
investors. Members have demonstrated solid financial performance despite
the severe economic downturn and have enabled National Rural, through
their substantial investments in member capital securities, to enhance
National Rural's financial strength. National Rural is committed to
continuing its mission of providing needed financing to its rural utility
members. I am certain that investors will continue to find National Rural
a valuable and wise investment."

ABOUT NATIONAL RURAL

National Rural is a cooperative that serves the nation's rural utility
systems, the majority of which are electric cooperatives. With
approximately $20 billion in assets, National Rural provides its
member-owners with an assured source of market-priced capital and
financial products and services.

This press release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Although we believe that the expectations reflected in such
forward-looking statements are based on current reasonable assumptions,
actual results and performance could differ materially from those set
forth in the forward-looking statements due to a variety of known and
unknown factors. Factors that could cause future results to vary from
current expectations include, but are not limited to, general economic
conditions, legislative changes, governmental monetary and fiscal
policies, changes in tax policies, changes in interest rates, interest
expense, demand for our loan products, changes in the quality or
composition of our loan and investment portfolios, changes in accounting
principles, policies or guidelines, and other economic and governmental
factors affecting our operations.

Contacts:

Mike O'Brien
Vice President
Corporate Communications
(703) 709-6709
Email Contact

Andrew Don
Vice President
Capital Market Relations
(703) 709-6869
Email Contact

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