Federal Agency Securities

Abstract

The federal agency market includes the debt of various entities chartered by Congress to provide funding support for the housing and agricultural sectors of the U.S. economy and specific funding projects of the U.S. government. The largest issuers are also known as government-sponsored enterprises (GSEs). GSEs are either public or government owned shareholder corporations (Fannie Mae, Freddie Mac, and Tennessee Valley Authority [TVA]) or the funding entities of federally chartered bank lending systems (Federal Home Loan Banks and the Federal Farm Credit Banks). The debt of the GSEs is not guaranteed by the U.S. government. Certain smaller federal agencies have been created by Congress to address the funding of specific projects and can have partial or total government “full faith and credit” guarantees (Financing Corporation [FICO], Resolution Funding Corporation [REFCORP], Export-Import [Ex-Im] Bank, U.S.A.I.D.S., Private Export Funding Corporation [PEFCO], and the Small Business Administration [SBA]). Many of the smaller federal agencies have limited or chosen to not issue their own debt, but have used the Federal Financing Bank for their nonappropriated funding needs. Over 97% of the outstanding federal agency market debt is issued by the GSEs. In 2007, the outstanding non-mortgage-backed debt of the GSEs and all federal agencies represented 9.4% of the U.S. debt market. The debt obligations of the federal agency issuers include a broad scope of maturities, structures, liquidity, and size. The variety of issuance practices, from the smallest to the largest multibillion, multicurrency calendar programs, high credit ratings, and market liquidity gives the federal agency market a broad domestic and global base of investors and dealers. Federal agency debt occupies a unique and important place on the “efficient frontier” of the debt market curve. Keywords: federal agency securities; federally related institutions; government-sponsored enterprises (GSEs); debentures; mortgage-backed securities; asset-backed securities; Tennessee Valley Authority (TVA); Fannie Mae; Freddie Mac; Federal Agricultural Mortgage Corporation; Federal Farm Credit Bank System (FFCBS); Federal Home Loan Bank System; Financing Corporation; Resolution Trust Corporation (RTC); the Farm Credit Assistance Corporation