Issued by federal government-sponsored corporations, these government-sponsored agency (GSA) securities are the direct obligations of the issuing agency. Although commonly referred to as "federal agencies," they are actually government-sponsored enterprises. GSA securities, while not fully backed by the U.S. Government, have implied AAA credit ratings and usually supply steady, dependable income.
Government-sponsored agency securities are a good investment choice if you're interested in dependable income and high credit quality. They are available in a wide range of issues and maturities to suit your particular needs, and often offer higher yields than U.S. Treasury securities of similar maturities.
Issuing agencies include:
| Fixed Income Government-Sponsored Agencies |
| Security Issuer |
Abbreviation |
Description |
Tax Treatment |
| Federal Home Loan Banks |
|
These institutions provide liquidity for the housing industry through savings and loan institutions. |
Exempt from state and local taxation. |
| Government National Mortgage Association |
GNMA "Ginnie Mae" |
This organization purchases mortgages and repackages them into securities, which are then resold to investors. This process helps to increase the amount of capital available for mortgage lending. Government backing makes default practically unheard of. |
Subject to state and local taxation. |
| Federal National Mortgage Association |
FNMA "Fannie Mae" |
FNMA purchases mortgages, packages them into securities, and resells them to investors. |
Subject to state and local taxation. |
| Federal Home Loan Mortgage Corporation |
FHLMC "Freddie Mac" |
Freddie Mac also assists in funding for the housing industry by purchasing and repackaging mortgages. |
Subject to state and local taxation. |
| Federal Farm Credit Banks |
|
These institutions provide funds for farmers to purchase land and equipment and finance crops. |
Exempt from state and local taxation. |
| Student Loan Marketing Association |
SLMA "Sallie Mae" |
This entity funds and services the Guaranteed Student Loan Program. |
Exempt from state and local taxation. |
| Separate Trading of Registered Interest and Principal of Securities |
STRIPS |
These are zero-coupon securities backed by the U.S. Government that have been separated into interest and principal components. Stripped interest components are sometimes called TINTS (Treasury Inflation-Indexed Securities). |
Exempt from state and local taxation. |
| Resolution Funding Corporation |
REFCORPS |
This government agency was formed in 1989 to raise funds for both the Resolution Trust Corporation and for institutions formerly belonging to the Federal Savings and Loan Corporation. REFCORPS are no longer issued, but are available on the secondary market in maturities of 1 to 30 years. |
Exempt from state and local taxation. |
| Financing Corporation |
FICOs |
This government agency assists the Federal Savings and Loan Insurance Corporation (FSLIC) by issuing bonds. FICOs are no longer issued, and not as liquid as REFCORPs; they do, however, offer higher yields as compensation. FICOs are available in the secondary market in 1- to 20-year maturities. |
Exempt from state and local taxation. |
|
Other issuing agencies include TIGR (Treasury Investment Growth Receipt), CATS (Certificates of Accrual on Treasury Securities), TRs, TVAs, ETRs, and COUGRs. The interest income derived from these investments may also be exempt from state and local taxation; consult your tax advisor for more information.
Many of the newer federal agency issues have call features that provide investors with higher yields to compensate for the possibility of the issues being called before their stated maturities. (Market value will fluctuate prior to maturity.)
