Safety

• U.S. agency securities are backed by the full faith and credit of the U.S. government.
• GSE issues are direct debt obligations of the issuing entity. They have an implied backing of the U.S. government, though not an explicit backing.

Yield

• Agency and GSE notes and bonds usually trade at yields offering a positive spread over Treasuries.
• Agencies and GSEs have large trading volumes, keeping liquidity risk low.

Diversity

• Secondary market capabilities available for both U.S. agencies and GSEs.
• U.S. agencies are exempt from registration with the SEC.
• U.S. agencies and GSEs offer a wide range of maturity terms.
• Both U.S. agencies and GSEs are issued on a regular basis.

Limitations

• GSE interest payments may be taxable income.
• Unlike U.S. agencies, GSE issues are not backed by the full faith and credit of the U.S. government, exposing investors to potential credit risk. However, it is widely believed by institutional investors in the market that the U.S. government would financially support an agency if the need occurred.