Browse Investing

Federal Agency Security: Debt Instruments Issued by Federal Agencies

Federal Agency Security is a debt instrument issued by an agency of the federal government, such as the Federal National Mortgage Association or the Federal Farm Credit Bank. Though not obligations of the U.S. Treasury, these securities are sponsored by the government and have high credit ratings.

Federal Agency Security refers to debt instruments issued by federal government agencies. Examples include organizations like the Federal National Mortgage Association (FNMA), Federal Home Loan Banks (FHLB), the Federal Farm Credit Bank (FFCB), and the Tennessee Valley Authority (TVA). These securities are not general obligations of the U.S. Treasury but are government-sponsored, which results in high credit ratings close to U.S. Treasury securities.

Mortgage-Backed Securities (MBS)

Issued by:

  • Federal National Mortgage Association (Fannie Mae)
  • Federal Home Loan Mortgage Corporation (Freddie Mac)

Farm Credit Bonds

Issued by:

  • Federal Farm Credit Bank (FFCB)

Power Bonds

Issued by:

  • Tennessee Valley Authority (TVA)

Home Loan Bonds

Issued by:

  • Federal Home Loan Banks (FHLB)

Considerations

  • Credit Ratings: Though not directly backed by the full faith and credit of the U.S. government like Treasury securities, their government sponsorship provides high credit ratings.
  • Interest Rates: Generally, these securities offer competitive interest rates that can be slightly higher than U.S. Treasuries due to their quasi-governmental status.
  • Market: These securities are typically traded in secondary markets, ensuring liquidity for investors.

Applicability

Investors who seek relatively high credit quality while willing to accept a marginally higher risk compared to U.S. Treasury securities might find federal agency securities attractive.

  • GSE: Government-Sponsored Enterprise. Federal agencies like Fannie Mae and Freddie Mac are GSEs.
  • MBS: Mortgage-Backed Securities. Debt obligations packaged and sold by entities like Fannie Mae.
  • Treasury Bond: A long-term, marketable debt instrument issued by the U.S. Treasury.

What makes federal agency securities different from U.S. Treasuries?

Federal agency securities are issued by government-sponsored entities and not directly by the U.S. Treasury. Hence, while having high credit ratings, they are not backed by the full faith and credit of the U.S. government.

Are federal agency securities safe?

Yes, they are considered very safe due to their close ties to the government, though they do carry slightly more risk than U.S. Treasuries.

How can I invest in federal agency securities?

These securities can be bought through brokers, financial advisors, or directly when they are issued. They are also traded in secondary markets.

Revised on Monday, May 18, 2026