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What Are Agency Bonds All About?

10 of 11 in Series: The Essentials of Investing in Stocks and Bonds

As an investment, agency bonds fit under two large umbrellas. Some of them are United States federal agencies; they are an actual part of the government just like Congress. Such official agencies include the General Services Administration, the Government National Mortgage Association, and the Small Business Administration.

Most of the so-called agencies, however, aren’t parts of the government. They are government-sponsored enterprises (GSEs): corporations created by Congress to work for the common good but then set out more or less on their own. Many of these faux agencies are publicly held, issuing stock on the major exchanges. Such pseudo-agencies include the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.

Here are just some of the many agencies that issue bonds:

  • Federal Farm Credit Banks (FFCB)

  • Federal Home Loan Bank (FHLB)

  • Federal Home Loan Mortgage Corporation (FHLMC)

  • Federal National Mortgage Association (FNMA)

  • Financial Assistance Corporation (FAC)

  • Financing Corporation (FICO)

  • General Services Administration (GSA)

  • Government National Mortgage Association (GNMA)

  • Government Trust Certificates (GTC)

  • Private Export Funding Corporation (PEFCO)

  • Resolution Funding Corporation (REFCORP)

  • Small Business Administration (SBA)

  • Tennessee Valley Authority (TVA)

  • U.S. Agency for International Development (USAID)

Federal agencies issue bonds that carry the full faith and credit of the U.S. government. GSEs, well, their bonds carry that mysterious implicit guarantee or moral obligation. Because there are more GSEs than federal agencies — both in terms of the number of agencies and the value of the bonds they issue — when investment experts speak of “agency bonds,” they are almost always talking about the bonds of the GSEs.

The three government-sponsored enterprises (GSEs) that issue the most bonds. [Credit: Source: Secur
Credit: Source: Securities Industry and Financial Markets Association (SIFMA). Figures are for 2005.
The three government-sponsored enterprises (GSEs) that issue the most bonds.

There are many GSEs, but the three represented in this illustration issue the vast majority of bonds.

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