Agency Debentures

DEFINITION of 'Agency Debentures'

Debt issued by a federal agency or a government-sponsored enterprise (GSE) for financing purposes. These types of debentures are not backed by collateral, but by the integrity and credit worthiness of the issuer. Officially, agency debentures issued by a Federal Agency, such as the Tennessee Valley Authority, are backed by the full faith and credit of the United States government. Agency debentures issued by a GSE are backed only by that GSE's ability to pay.

BREAKING DOWN 'Agency Debentures'

The market place appears to believe that GSE agency debentures carry an implicit guarantee from the United States government. This is due to the GSE's direct borrowing ability from the U.S. Treasury and the importance of the GSE's Congressional charters and missions.


The agency debenture market is very large. At one point in the late 1990s outstanding agency debt comprised primarily of the debt issued by Fannie Mae and Freddie Mac nearly surpassed the amount of debt issued by the U.S. Treasury.


Some feel the GSEs have an unfair funding advantage over publicly or privately held corporations, and that the amount of GSE debt and their corresponding investment portfolios pose too much risk to the entire U.S. financial system. Others believe the role the GSEs play in promoting home ownership, for example, justify their funding advantage.

RELATED TERMS
  1. Debenture

    A type of debt instrument that is not secured by physical assets ...
  2. Compulsory Convertible Debenture ...

    A type of debenture in which the whole value of the debenture ...
  3. Debenture Redemption Reserve

    A provision that was added to the Indian Companies Act of 1956 ...
  4. Agency Security

    Low-risk debt obligations that are issued by U.S. government-sponsored ...
  5. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  6. Government-Sponsored Enterprise ...

    Privately held corporations with public purposes created by the ...
Related Articles
  1. Markets

    Comparing Debentures And Bonds

    Debentures and bonds are debt instruments that companies issue to raise capital beyond their normal cash flows.
  2. Personal Finance

    Agency Bonds: Limited Risk And Higher Return

    Discover these safe alternatives to Treasury bonds.
  3. Investing

    How Does a Convertible Debenture Work?

    A convertible debenture is an interest-bearing loan a company issues that can be turned into stock.
  4. Markets

    Debentures

    Learn more about this type of debt instrument.
  5. Markets

    How Fannie Mae And Freddie Mac Were Saved

    These mortgage giants had to be put under government conservatorship, driving home the gravity of the subprime crisis.
  6. Managing Wealth

    The Wonders Of Convertible Bonds

    Ever wondered what exactly a convertible bond does? Read the features of a convertible bond and learn how important the conversion factor is to you as an investor.
  7. Markets

    Why Fannie Mae And Freddie Mac Might Be In Trouble

    Fannie Mae and Freddie Mac are under increased scrutiny as debates continue about conservatorship, share price, and profit allocations.
  8. Entrepreneurship & Small Business

    Remodeling The Housing Finance Industry

    The meltdown in mortgage-backed securities is bringing about reform in home financing.
  9. Investing

    The Power of Major Credit Rating Agencies

    The performance of major independent credit rating agencies is a controversial topic, particularly due to the strength of their influence.
  10. Personal Finance

    Fannie Mae, Freddie Mac And The Credit Crisis Of 2008

    Is the U.S. Congress' failure to rein in these mortgage giants to blame for the financial fallout?
RELATED FAQS
  1. How is a debenture stock different from a regular debenture?

    Learn to differentiate between standard debentures and debenture stocks, which are equities that act more like preferred ... Read Answer >>
  2. How risky is it to enter into a debenture agreement?

    Understand the nature of debenture agreements and the inherent risks and clauses that may provide additional protection for ... Read Answer >>
  3. What is the difference between a debenture and a bond?

    Learn how to differentiate between debentures and bonds, two types of debt securities that can be issued by a government ... Read Answer >>
  4. What are the differences between preference shares and debentures?

    Learn why preference shares are equity securities and debentures are debt securities. Understand the differences between ... Read Answer >>
  5. What is the difference between nonconvertible debentures and fixed deposits?

    Debentures and fixed deposits are two different ways of investing money. A debenture is an unsecured bond. Essentially, it ... Read Answer >>
  6. What legal recourse do I have if the counterparty in a debenture agreement does not ...

    Understand the risks and benefits of debenture agreements, and what legal recourse you have should the other party fail to ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center