Agency bonds are issued by either agencies of the U.S. government, or government-sponsored enterprises (GSE’s). GSE and agency bonds generally offer slightly higher yields than U.S. Treasuries with the same maturity. The extra yield is a reflection of their credit risk. Agency bonds do not have the unconditional backing of the U.S. government, though they are still considered to be high credit quality.
Tax treatment on agency bonds depends on the issuer and your own tax situation. Income from Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) are taxable on both the federal and state level. Whereas Federal Home Loan Banks, Federal Farm Credit, and Tennessee Valley Authority (TVA) are state and local tax-exempt. If you sell a bond before maturity for a profit, that profit will be subject to federal and state capital gains tax.
ACAP Trading offers primary and secondary liquidity on Agency bonds and offerings can be found on BOLTS™. To view our Bonds On-Line Trading System™, please click here.