Agency Security

AAA

DEFINITION of 'Agency Security'

Low-risk debt obligations that are issued by U.S. government-sponsored entities (GSEs) and other federally related bodies. Agency securities are issued by GSEs, including the Federal National Mortgage Association (FNMA), Federal Home Loan Bank and the Student Loan Marketing Association (SLMA). These entities were created to reduce the costs associated with borrowing for certain areas of the economy, including homeowners, students and farmers.

INVESTOPEDIA EXPLAINS 'Agency Security'

Agency securities are exempt from SEC registration. The GSEs issue discount notes and bonds that pay interest and have a low risk of default. Unlike U.S. Treasury Bills, agency securities are not backed by the full faith and credit of the United States Government (with the exception of the Farm Credit Financial Assistance Corporation). Agency securities are exempt from local and state taxes.

RELATED TERMS
  1. Federal Home Loan Bank Act

    An act passed by the Hoover administration in 1932 that was designed ...
  2. Treasury Secretary

    The Secretary of the Treasury is a member of the Presidential ...
  3. Fannie Mae - Federal National Mortgage ...

    A government-sponsored enterprise (GSE) that was created in 1938 ...
  4. Government Security

    A bond (or debt obligation) issued by a government authority, ...
  5. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with ...
  6. Freddie Mac - Federal Home Loan ...

    A stockholder-owned, government-sponsored enterprise (GSE) chartered ...
RELATED FAQS
  1. How can I create a yield curve in Excel?

    You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields ... Read Full Answer >>
  2. What are the different formations of yield curves?

    There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >>
  3. What is the difference between the rule of 70 and the rule of 72?

    The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>
  4. On what basis does the sustainable growth rate fluctuate?

    The main difference between a bond’s yield to maturity, or YTM, and the spot rate is that the YTM uses the same interest ... Read Full Answer >>
  5. What are some classes I can take to prepare for the Series 6 exam?

    The risk-return tradeoff for bonds is the increased yield investors can obtain from corporate and other types of bonds that ... Read Full Answer >>
  6. What level of return on equity is average for companies in the chemicals sector?

    The modified duration is an adjusted version of the Macaulay duration and takes into account how interest rate fluctuations ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Diversification Beyond Stocks

    If you think holding several stocks means you're diversified, think again - there's much more to be done to reduce portfolio risk.
  2. Taxes

    Taxation Rules For Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.
  3. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  4. Taxes

    Agency Bonds: Limited Risk And Higher Return

    Discover these safe alternatives to Treasury bonds.
  5. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  6. Professionals

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
  7. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.
  8. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  9. Investing

    Why Some Investors Are Tilting Toward TIPS

    Last month’s five-year TIPS auction drew nearly $48 billion in interest, a sign of recent renewed demand for this inflation indexed asset among investors.
  10. Mutual Funds & ETFs

    The EMAG Emerging Mkts Bond ETF: Worth the Risk?

    The Market Vectors Emerging Markets Aggregate Bond ETF (EMAG) might offer long-term rewards, but is now the best time to jump in?

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center