Investopedia explains '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.
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