Agency Debentures

AAA

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.

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.

RELATED TERMS
  1. Fannie Mae - Federal National Mortgage ...

    A government-sponsored enterprise (GSE) that was created in 1938 ...
  2. Debenture

    A type of debt instrument that is not secured by physical assets ...
  3. Government-Sponsored Enterprise ...

    Privately held corporations with public purposes created by the ...
  4. Freddie Mac - Federal Home Loan ...

    A stockholder-owned, government-sponsored enterprise (GSE) chartered ...
  5. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
  6. Agency Bond

    A bond issued by a government agency. These bonds are not fully ...
Related Articles
  1. Bonds & Fixed Income

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  2. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  3. Options & Futures

    Callable Bonds: Leading A Double Life

    Find out more about these dangerous and exciting cousins to regular bonds.
  4. Taxes

    Agency Bonds: Limited Risk And Higher Return

    Discover these safe alternatives to Treasury bonds.
  5. Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
  6. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  7. Mutual Funds & ETFs

    Preferred Stock ETFs: Are They Right for You?

    Considering preferred stock ETFs? Here's a look at their pros and cons.
  8. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  9. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  10. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center