Agency Bonds

Agency bonds are debt securities issued by either a government agency or a government sponsored entities (GSE).  While the debt of government agencies is backed by the government, GSEs are not.  However, GSEs are corporations that hold government charters because their businesses are considered important to the public.  The idea behind these GSEs is that the corporations that have the charters will not be allowed to fail by the government, making the return on their bonds very low since they are considered so secure.