Agency Bond

Agency Bond

A debt obligation owed by an agency of the U.S. Government. While similar to Treasury securities, agency bonds are issued by a particular agency of the federal government, rather than the federal government itself. These agencies include Ginnie Mae, the Federal Farm Credit Bank, and the U.S. Postal Service. With the exceptions of those owed by the Postal Service and the Tennessee Valley Authority, such obligations are guaranteed by the U.S. government. They offer higher interest rates than Treasury securities. They are less formally called agencies.

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Agency bond. Some federal agencies, including Ginnie Mae (GNMA) and the Tennessee Valley Authority (TVA), raise money by issuing bonds and short-term discount notes for sale to investors.

The money raised by selling these debt securities is typically used to make reduced-cost loans available to specific groups, including home buyers, students, or farmers.

Interest paid on the securities is generally higher than you'd earn on Treasury issues, and the bonds are considered nearly as safe from default. In addition, the interest on some -- but not all -- of these securities is exempt from certain income taxes.

Securities issued by former federal agencies that are now public corporations, including mortgage-buyers Fannie Mae and Freddie Mac, are also sometimes described as agency bonds.