Lesson 5 of 9
In any country, the central government can create an agency or a separate organization that issues bonds for its various departments and different purposes. The bonds so issued are not directly issued by the government, and therefore are called semi-government or agency bonds. Depending on the issue, these bonds may have an implied guarantee of the government.
In the US, such securities are called Federal Agency Securities.
The issues of these agency securities can be broadly classified as: Federally-related institutions, and Government-sponsored enterprises (GSE). Let’s look at these institutions and the kinds of securities issued by them.
These are the arms of federal government.
Examples:
These securities are backed by the full faith and credit of the US government (with the exception of the Tennessee Valley Authority and Private Export Funding Corporation).
These are privately-owned, publicly chartered entities. These enterprises were created to help reduce the borrowing cost of certain sectors such as farmers, homeowners, and students. GSEs issue debentures and discount notes. There are six GSEs.
Securities Issued