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.

Federally-related Institutions

These are the arms of federal government.

Examples:

• Export-Import Bank of United States
• Tennessee Valley Authority (TVA)
• The Government National Mortgage Association (Ginnie Mae)
• Private Export Funding Corporation
• Maritime Administration
• Small Business Administration

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).

Government-sponsored enterprises (GSE)

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.

• Federal National Mortgage Association (Fannie Mae): Credit for residential housing sector.
• Federal Home Loan Mortgage Corporation (Freddie Mac): Credit for residential housing sector.
• Federal Home Loan Bank: Credit for residential housing sector.
• Federal Agriculture Mortgage Corporation (Farmer Mac): Credit for farm proprieties
• Federal Farm Credit System: Credit for agriculture
• Student Loan Marketing Association (Sallie Mae): Credit for higher education.

Securities Issued

• Ginnie Mae, Fannie Mae, and Freddie Mac issue mortgage-backed (pass-through) securities, Collateralized Mortgage Obligations, and stripped mortgage-backed securities.
• Sallie Mae issues asset-backed securities.