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Finance: What is an Agency Bond? 2 Views

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What is an Agency Bond? Agencies bonds are issued by government agencies, not the treasury. The typical government bonds (T-bills, T-notes, and such) are issued and backed by the treasury or a municipality; these are not. They are still backed by the government though, issued specifically by the government agencies: Federal Housing Administration, Small Business Administration, and Government National Mortgage Association.

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Finance allah shmoop What is an agency bond Okay the
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federal government sells a lot of paper all the time
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That is it exchanges a promise to pay investors of
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thousand bucks in a year in return for nine hundred
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seventy two dollars today those federally backed pieces of paper

00:20
are back or guaranteed by the full faith and credit
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of the us government's ability to tax it's poor hard
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working and taxpaying citizens But inside of our massive government
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exists all kinds of agencies particularly home and student and
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you know other loan agencies who dole out money to
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us citizens all the time Well fannie mae in her
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brethren and while sister in is that a thing system
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anyway her family of agencies while they issue paper as
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well and they issue it separately from the federal government
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And for the most part they're agency bonds look a
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whole lot like federal bonds with one key exception They
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are not backed by the federal government's full faith and
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credit directly Rather they're just backed by the credit worthiness
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of the agency itself backing them that is fannie mae
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wants to raise cash for whatever more homes more loans
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Blah blah blah It sells paper to the public and
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institutions and whomever and promises to pay well basically with
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a handshake That shake is based on its ability to
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raise more money in the future or wine loudly enough
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so that the federal government steps in and bails them
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out If some one in a million crisis happens and
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hello two thousand eight financial crisis we're looking at you
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All right Well the basic idea here is that agency
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bonds are backed by the agency itself not by the
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full whammy of the full federal government so they generally
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yield a skosh more interest to account for that scootch
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more risk that investors take in buying them No Should
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some other one in a million crisis ever happen again
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So that's an agency bond not to be confused with
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a bond agency which you know is the british secret 00:01:58.357 --> [endTime] service
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