Agency Security

Agency security refers to a debt security issued by a government-sponsored enterprise (GSE) or a federal agency. These securities are considered low-risk investments because they are issued by entities like Fannie Mae, Freddie Mac, or the Federal Home Loan Banks, which are closely tied to the U.S. government. However, they are not directly backed by the full faith and credit of the U.S. government, except in the case of securities issued by federal agencies like the Government National Mortgage Association (Ginnie Mae).

Example

An investor might purchase a mortgage-backed security issued by Fannie Mae as a low-risk investment that provides a steady income stream from mortgage payments.