Agency Securities Definition

Fixed-income securities that are issued by U.S. government- sponsored entities (GSEs) that were started to reduce borrowing costs for students, farmers, and homeowners. Agency securi-ties are issued by organizations such as Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae). Only the securities issued by the Farm Credit Financial Assistance Corp. are backed by the U.S. government. However, because of their special GSE status, the market doesn’t demand as high of an interest rate as it would from an equivalent private sector issuer because of the perception that the government would step in to back the securities in the case of a default. However, the U.S. government does not actually back these debt issues.
Webster's New World Finance