Agency Bonds

The term agency bonds is primarily used to define bonds which are issued by U.S. government agencies but are not government bonds in the strict sense of the term.

Bonds issued by publicly owned U.S. government-sponsored enterprises (GSEs) also fall under the agency bond designation.

Agencies which issue bonds that are categorized as agency bonds include (but are not limited to) the Federal National Mortgage Association (FNMA or Fannie Mae) which publishes the HPSI index, the Government National Mortgage Association (GNMA or Ginnie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac).

Agency bonds are considered to be low-risk investments because they are backed by taxpayer money. They may also have more favorable yield rates than similar products issued by private companies because government agencies benefit from tax exemption and low capital requirements.

More on this topic:
Interactive securities broker comparison