Types of Agency Securities:

• Mortgage-Backed Securities (MBS): Bonds backed by a pool of residential mortgages. This includes Fannie Mae (FNMA), Freddie Mac (FHLMC), and Ginnie Mae (GNMA).

• Agency Bonds: Direct debt securities issued by agencies like Fannie Mae and Freddie Mac. They are not backed by mortgages but are often considered low-risk due to government backing.

Benefits of Investing in Agency Securities:

• Lower Risk: Due to government guarantees, these securities are typically seen as low-risk investments.

• Stability: Agencies provide stability in the housing market, especially during volatile periods.

• Liquidity: Agency securities ensure liquidity in the mortgage market, enabling easy buying and selling of these investments.

Conclusion:

Agencies like Fannie Mae, Freddie Mac, and Ginnie Mae are crucial to the U.S. financial system. They provide liquidity, reduce investment risk, and help ensure affordable housing by supporting the mortgage market. Agency securities offer a stable, lower-risk option for investors.