Agency Securities
Agency securities are securities issued by federal agencies or government-sponsored enterprise (GSEs), other than the U.S. Treasury. The agencies that issue or guarantee these securities include:
- • Federal National Mortgage Association (Fannie Mae)
- • Federal Home Loan Mortgage Corporation (Freddie Mac)
- • Federal Home Loan Banks
- • Government National Mortgage Association (Ginnie Mae)
Unlike Treasuries, agency securities, with the exception of those issued by Ginnie Mae, are not explicitly backed by the full faith and credit of the United States government, although the general expectation of the investor community is that the federal government would not let these entities fail. Securities issued by the Federal Home Loan Banks are exempt from state and local income tax, but securities issued by the other agencies are not tax-exempt.
Agency securities generally take the form of mortgage-backed securities (MBSs), which we discuss later in this chapter.
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Issuers of Agency Securities |
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Name |
Backing |
Type of Entity |
Function |
Purpose of Entity |
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* mortgage-backed securities |
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Freddie Mac
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Implied guarantee from federal government |
Government- sponsored enterprise |
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