Federal Agency Debt

Some government agencies issue their own securities to finance their activities. These agencies usually are formed to channel credit to a particular sector of the economy that Congress believes might not receive adequate credit through normal private sources. Figure 2.5 reproduces listings of some of these securities from The Wall Street Journal. The majority of the debt is issued in support of farm credit and home mortgages.

Figure 2.4 Treasury bonds and notes.

TREASURY BONDS, NOTES & BILLS

U.S. Treasury strips as of 3 p.m. Eastern time, also based on transactions of SI million or more. Colons in bid-and-asked quotes represent 32nds; 99:01 means 99 1/32. Net changes in 32nds. Yields calculated on the asked quotation. ci-s1ripped coupon interest. bp-Treasury bond, stripped principal. np-Treasury note, stripped principal. For bonds callable prior to malurily, yields are computed to the earliest tail date for Issues quoted above par and to the maturity date for issues below par.

Source: Beer, Stearns & Co. via Street SoftwareTechnology Inc.

GOVT. BONDS & NOT ES

Maturity

Rate Mo/Yr Bid Asked Chg.

SVs Aug OOn 99:28 99:30

6^4 Aug OOn 99:31 100:01

Vh Sep OOn 99:20 99:22

4 Oct OOn 99:12 99: M ja/j Oct OOn 99:26 99:2« 53A Nov OOn 99:24 99:26 -1 B'/2 Nov OOn 10(1:17 100:19 4VS Nov OOn 99:13 99:15 5Va Nov OOn 99:23 99:25 j5/a Dec OOn 99:06 99:08 5'/s Dec OOn 99:18 99:20 + 1 41/2 JanOln 99:01 99:03 + 1 5V4 JanOln 99:13 99:15 + 1 SVa Feb 01 n 99:13 99:15 + 1 Vf i Feb 01 n 100:20 100:22 IP/4 Feb 01 102:25 102:27

5 Feb 01 n 99:05 99:07 5s/g Feb 01 n 99:16 99:18 4'/8 MarOln 98:29 98:31 63/b Mar 01 n 99:28 99:30 9Ve Feb 06 114:18 114:22 + 6?/, MavOón 103:11 103:13 +

OctOin 101:21101:23 +

6V2 3VS 6V4 7Va

6.47

6.41

6.39

6.40

Maturity Rate Mo/Yr

Bid Asked chg. Y id.

10s/e Nov 04-09 114:17 114:21 + 41/4 Jan 101 101:2B 101:29 + 6Vj FeblOn 103:19 103:20 + 113/4 Feb 05-10 120:22 120:28 + 10 May 05-10 114:18 114:22 + I2V4 Nov 05-10 128:03 128:09 + 13'/e May 06-11 135:24 135:30 + B 14 Nov 06-11 139:01 139:07 + 9 103/e Nov 07-12 123:08 123:14 + 12 12 Aug 08-13 135:09 135:15 + 13 13V4 May 09-14 146:03 146:09 + 13 12V2 Aug 09-14 142:00 142:06 +14 113/4 Nov 09-14 138:04 138:10 +14 111/4 Feb 1J 148:26 149:00 +13 lOVa Aug 15 143:24 143:30 + 12 97/a Nov 15 136:30 137:04 + 12 9'/4 Feb 16 131:05 131:11 +12 7V4 Mav 16 111:20 111:24 + 12 7Va Nov 16 114:10 114:14 +12 63/4 Mav 17 127:16 127:22 +14 7V4 Aug 22 114:12 114:16 +17 7Ve Nov 22 118:29 119:01 +17 7VS Feb 23 112:31 113:03 + 16 6V4 Aug 23 102:17 102:19 +15 7V2 Nov 24 118:15 118:19 +17 75/a Feb 25 ¡20:08 120:12 + 18 &Vt Aug 25 110:30 111:02 +¡7 6 Feb 26 99:30 100:00 + 17 63/4 Aug 26 109:24 109:26 +18 6Vj NOV 26 106:18 Î06:20 +17 65/b Feb 27 108:09 108:11 +16 63/a Aug 27 105:06 105:08 +18 6Vs Nov 27 102:00 102:02 + 19 35/a Apr 28Î 96:09 96:10 + 3 5V2 Aug 28 93:31 94:01 +18 J'/4 Nov 2fl 90:23 90:25 +16 5V4 Feb 29 90:29 90:31 +1B 3'A Apr29i 100:17 100:18 + 2 6]/a Aug 29 103:17 103:18 + 20 *•/< May 30 107:06 107:07 + 2!

6.46 6.40 4.01 6.00 6.38 6.38 6.36 6.35 6.33 6.31 6.31

6.30

6.05

6.06 6.05 6.04 6.03 6.03 6.01 6.00 6.00 6.00 5.99 5.98 5.97 3.B4 5.94 5.93 5.91 3.84 Î.87 5.74

Source: The Wall Street Journal, August 2, 2000. Reprinted by permission of The Wall Street Journal, © 2000 Dow Jones & Company, Inc. All Rights Reserved Worldwide.

The major mortgage-related agencies are the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA, or Fannie Mae), the Government National Mortgage Association (GNMA, or Ginnie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac). The FHLB borrows money by issuing securities and lends this money to savings and loan institutions to be lent in turn to individuals borrowing for home mortgages.

Freddie Mac and Ginnie Mae were organized to provide liquidity to the mortgage market. Until the pass-through securities sponsored by these agencies were established (see the discussion of mortgages and mortgage-backed securities later in this section), the lack of a secondary market in mortgages hampered the flow of investment funds into mortgages and made mortgage markets dependent on local, rather than national, credit availability.

CHAPTER 2 Markets and Instruments

Figure 2.5 Government agency issues.

GOVERNMENT AGENCY & SIMILAR ISSUES

Tuesday, August 1,2000 Over-the-counter mid-afternoon quotations based on large transactions, usually It million or more. Colons In bid-and-asked quotes represent 32nds; >01:01 means 101 1/32.

All yields are calculated to maturity, and based on the asked quote. '-Callable issue, maturity date shown. For issues callable prior to maturity, yields are computed to the earliest call date for Issues quoted above par, or 100, and to the maturity date for issues below par.

Source: Bear, steams & Co. via Street Soltware Technology Inc.

Fannie Mae Rate Mat.

5.« 3-01 4.63 T0-D! 6.43 1-02 5.38 3-02 6.63 4-02 6.25 11-02 6,50 4-09*

issues Bid Asked

99:09 99:11 97:16 97:18 99:22 99:24 97:24 97:26 99:22 99:24 98:24 98:27 93:24 93:28 93:14 93:16 95:07 95:11 96:25 96:29 101:04 101:08 100:16 100:20 90:30 91:02 101:23 101:27 103:13 103:17

Freddie Mac Rate Mat. 5.00 2-01 5.38 3-011 5.75 4-01 4.75 12-01 5,50 t02 5.75 7-03 7.10 4-07 100:04 6.22 3-08* 99:26 5.75 4-06 92:02

Bitf

Asked Yid.

99:04 6.73 99: ¡6 6.26 99:06 6.74 97:14 6.73 97:26 6.62 97:01 6.88 100:07 7.05 99:30 6.23 92:06 7.0E

Rate Mat. 5.13 10-08 5.75 3-09 0.00 11-14 0.00 11-19 0.00 12-25

Bid Asked Yld.

Farm Credit Fin. Asst. Corp. Rale Mat. Bid Asked YM.

9.36 7-03 107:02 107:05 6.46 8.80 &05 106:31 107:02 7.05 9.20 M5' 100:12 100:15 5.86

Federal Farm credit Bank

Rate Mat. Bid Asked Yld.

Federal Home Loan Bank

Rate Mat, Bid Asked Yld.

4.49 11-00 99:10 99:12 6.94 4.98 11-00 99:14 99:14 6.67 5.42 1-01 99:22 99:24 6.14

5.50 8-01 96:22 98:24 6.76 5.20 9-01 99:30 100:00 5.20 4.86 10-01 97:20 97:22 6.93

Rate

4.63 4.66 6.18 5.63 5.13 4.78 5.04 5.28 9.50 7.00 7.00 5.80

9-08

97:11 97:12 99:00 97:06 95:01 93:14 99:27 95:14 109:24 98:12 99:00 92:03

Asked Yld.

97:13 6.95 97:14 6.93 99:02 6.89 97:09 6.62 95:04 6.69 93:17 7.07 99:30 5,08 95:17 6.80 109:27 6.36 9B:15 7.29 99:03 7.14 92:07 7.08

Financing

Rate Mat.

10.70 10-17

9.80 11-17

10.00 5-18

10.35 8-18

9.65 11-18

9.90 12-18

9.60 12-18

Corporation Bid Asked

138:02 136:06 136:08 136:12 125:16 125:20 133:20 133:24 135:09 135:13 138:26 136:30 132:16 132:20 134:22 134:26 131:19 131:23 132:14 132:18 132:24 132:28 124:22 124:26 120:26 120:30

GNMA Mtge. Issues

Rate Mat.

5.50 30Yr 6.00 30Yr 6.50 30Yr 7,00 30Yr 7.50 30Yr S.OO 30Yr 8.50 30Yr 9.00 30Yr

Bid Asked

88:31 89:01 92:10 92:12 95:00 95:02 97:09 97:11 99:0« 99:10 100:28 100:30 102:04 102:06 103:04 103:06

Rate Mai. Bid Asked Yld.

9.50 30Yr 103:20 103:22 8.57

Inter-Amer.

Rate Mai.

4.13 t06

12.25 12-08

6.80 10-25

Devel. Bid

98:04 100:04 132:28 112:14 109:31 110:2! 97:08 106:14 104:04

Bank

Asked Yld.

96:07 4.51 100:07 4.56 133:00 6.98 112:18 6.95 110:03 6.(9 110:26 7.04 97:12 7.36 106:18 6.47 104:08 6.45

Resolution Funding Corp. Rate Mat. Bid Asked Yld.

8.13 10-19 119:07 119:114,36

Student Loan Marketing Rate Mat. Bid Asked Yld. 6.05 9-00 99:30 100:00 4.05 7.00 12-02 100:16 100:19 4.71 7.30 8-?2 101:30 102:02 7.04 0.00 10-22 22:11 22:15 4.85

Tennessee valley Authority

Rate Mat, 6.00 11-00 6.50 a-oi 6.36 6-05 3.36 1-07 6.75 11-25 8.25 7.25

Bid Asked Yld.

99:22 99:24 4.93 99:15 99:17 4.97 96:24 98:27 4.64 95:20 95:23 4.« 102:26 102:30 4.51 4-42* 109:26 109:30 7.30 7-43* 104:08 104:12 4.93

Source: The Wall Street Journal, August 2, 2000. Reprinted by permission of The Wall Street Journal, © 2000 Dow Jones & Company, Inc. All Rights Reserved Worldwide.

Some of these agencies are government owned, and therefore can be viewed as branches of the U.S. government. Thus their debt is fully free of default risk. Ginnie Mae is an example of a government-owned agency. Other agencies, such as the farm credit agencies, the Federal Home Loan Bank, Fannie Mae, and Freddie Mac, are merely federally sponsored.

Although the debt of federally sponsored agencies is not explicitly insured by the federal government, it is widely assumed that the government would step in with assistance if an agency neared default. Thus these securities are considered extremely safe assets, and their yield spread above Treasury securities is usually small.

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