We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is an Agency Bond?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 7,330
Share

An agency bond is a type of security that is issued by a properly authorized and recognized financial entity by the government, with similar functions to those of a United States Treasury Bond. In effect, agency bonds are another example of a way of making a relatively safe investment, with an excellent opportunity of reaping a small increase in profits as the bond matures. Here are some examples of how an agency bond works, as well as some of the government-sponsored organizations that are authorized to issue the bonds.

While an agency bond is issued by a financial agency that is not under the control of the government, each sponsored agency is required to operate under specific regulations that are issued by the United States government. Among the better known agencies that are authorized to issue an agency bond are the Federal National Mortgage Association, known popularly as Fannie Mae. Other popular agencies are the Student Loan Marketing Association, known as Sallie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac.

Along with these three top agencies, the Federal Farm Credit Bank, the Tennessee Valley Authority, and the Government National Mortgage Association (Sallie Mae) also raise money with the issue of short-term discount bonds that are available to both individuals and investors associated with various types of institutions.

It is important to note that while the government backs the issue of all these incarnations of the agency bond, they do not guarantee them, as they would with a US Treasury bond. Any bond issued by an outside agency is considered to be protected under the provisions offered by these private institutions. As such, any issues with the bonds must be addressed with the issuing agency, not the federal government.

The purpose of the agency bond is to allow individuals and entities within the target group to take advantage of interest bearing bonds that will help in the pursuit of a specific purpose. For example, a Sallie Mae is geared toward assisting students in pursuing and paying for an education. Fannie Mae bonds, as well as Freddie Mac bonds, focus more on providing assistance and support for purchasing homes and property. Bonds issued by the Farm Credit Bank focus on assisting persons involved with agriculture in some manner. To this end, the agency bond is normally not liable for any type of local or state taxes, although all forms of the agency bond are subject to federal taxes.

The duration of the bonds before maturity will vary from one instance to another. Persons who are interested in and qualify for some sort of agency bond can sit down with a financial adviser and determine what type of agency bond, the amount of the bond, and the duration until maturity is right for the particular situation.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-an-agency-bond.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.