Definition of Agency security:
An agency security is a low-risk debt obligation that is issued by a U.S. government-sponsored enterprise (GSE) or other federally related entity. Agency securities are issued by GSEs which include the Federal National Mortgage Association (FNMA), Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), the Student Loan Marketing Association (SLMA).
One issued by government agencies (such as municipalities) and which are usually exempt from most or all taxes.
Government-sponsored enterprises (GSEs) were created to reduce the costs associated with borrowing for certain sectors of the economy. For example, Federal National Mortgage Association (known as Fannie Mae) was introduced to improve the flow of credit in the housing economy. The Federal Agricultural Mortgage Association (Farmer Mac), a farming GSE, guarantees the timely repayment of principal and interest to agricultural bond investors. When a GSE issues a loan in the form of a bond, the security is referred to as an agency security.
Meaning of Agency security & Agency security Definition