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Question: What are fixed-income securities?

Answer: Fixed-income securities are financial instruments that:
  • provide interest earnings and the return of principal at maturity, and
  • involve an investor loaning money to a government entity or a corporation for a specified time.

Interest payments may be made annually, semi-annually, or monthly, or they may compound until the date of maturity.

Examples of fixed-income instruments include Treasury securities, agency securities, corporate bonds and municipal bonds.

Question: Where can I find more information on fixed-income securities?

Answer: Information on fixed-income securities can be found on The Bond Market Association website.

Government statistics on flows and ownership of fixed-income securities are available through the Treasury International Capital System data and the Federal Reserve Board’s Flow of Funds data.

See below for more information on fixed-income securities in:

 Treasury Market

Question: How does the Treasury decide what securities to sell?

Answer: The Treasury Department’s primary goal in debt management is to finance government borrowing needs at the lowest cost over time. The Office of Debt Management is responsible for providing the Assistant Secretary for Financial Markets and the Deputy Assistant Secretary (Federal Finance) with advice and analysis on matters related to the Treasury's debt management policy. You can find additional information on this subject in the overview of debt management provided on our website.

Question: How do I buy Treasury securities?

Answer: Sales of U.S. Treasury securities at original issue are conducted by the Bureau of the Public Debt. You may also buy U.S. Treasury securities through a financial institution or securities dealer. Information on buying Treasury securities is available on the Bureau of the Public Debt website.

Question: Where can I find information on Treasury's auction rules?

Answer: Detailed information on auction rules can be found in the Treasury Uniform Offering Circular (UOC) (31 CFR Part 356), which, in conjunction with the announcement for each auction, sets out the terms and conditions for the sale and issue of marketable Treasury bills, notes, bonds and TIPS.

Corporate Market

Question: What are corporate bonds?

Answer: Corporate bonds are debt securities issued by private and public corporations. Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business.

Municipal Market

Question:  What are municipal bonds?

Answer: Municipal bonds are fixed-income or debt securities issued by U.S. states, counties, cities, local government agencies and other political subdivisions. The proceeds from these bonds are used for general expenditures or to fund specific projects such as new schools, highways, and sports stadiums. Interest payments on municipal bonds are usually exempt from federal taxes. Some are also exempt from state and local taxes in the area in which they are issued.

Agency Securities

Question: What are Agency Securities?

Answer: The term “agency securities” is sometimes used by brokers, dealers and investment advisors to refer to securities issued or guaranteed by a variety of entities other than the U.S. Treasury. Agency securities are not the same as U.S. Treasury securities. An agency security represents a loan by the security purchaser (the investor) to the issuing entity and an investor should consider the different characteristics and different guarantees of agency securities. The term “agency securities” refers to securities issued by or guaranteed by:

  • Government corporations -- Examples of these include the Government National Mortgage Association (Ginnie Mae) and the Tennessee Valley Authority (TVA)
  • Government sponsored enterprises (GSEs) -- GSEs are privately owned, but were chartered by Congress to perform certain public functions in particular sectors of the economy.

For example, the housing sector GSEs are the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks (cooperatively owned by their member institutions, they issue debt through their joint Office of Finance).

The Farm Credit System Banks are cooperatively owned, issue debt through the Farm Credit Bank Funding Corporation and are agriculture sector GSEs. The Student Loan Marketing Association (Sallie Mae) is a higher education sector GSE that currently is in the transition process to full privatization. The Federal Agricultural Mortgage Corporation (Farmer Mac) provides a secondary market for agricultural real estate and rural housing mortgage loans.

Question: Are agency securities backed by a U.S. government guarantee?

Answer: Some are, but many are not. Ginnie Mae guarantees investors timely payment of principal and interest on participation certificates in pools of federally insured or guaranteed loans made by the Federal Housing Administration and several other agencies.

Ginnie Mae guaranteed securities are fully backed by the U.S. government. In contrast, the securities of government sponsored enterprises (or GSEs) are not obligations of, nor are they guaranteed by, the U.S. government and these GSE issuers are required by law to disclose this fact in their securities issuances.

In addition, although it is a government corporation, the securities of the Tennessee Valley Authority are not guaranteed by the U.S. government. For further information on the issuances of specific GSEs or government corporations, please refer to their websites or publications.


Question: What are asset-backed securities?

Answer: Asset-backed securities (ABS) are bonds that represent pools of loans, such as mortgage, home equity, credit card and auto loans. The most prevalent type of asset-backed securities are those that are backed by first-mortgage loans, called mortgage-backed securities or MBS, which are generally considered to be a separate asset class from ABS. For more information see The Bond Market Association investor guides on ABS and MBS.


Question: What are equity securities?

Answer: Equity securities are shares of common stock and preferred stock that represent claims on their proportional share in a company's net assets and profits. They represent equity ownership in a company, and usually provide voting rights to the holder.

Question: How are equity securities traded?

Answer: They may be traded either on an exchange or in the over-the-counter market. More details on exchanges and the over-the-counter market can be found by visiting the following websites:

  • New York Stock Exchange (NYSE)
  • American Stock Exchange (ASE)
  • National Association of Securities Dealers Automated Quotations (NASDAQ)


Question: What is the foreign exchange market?

Answer: The foreign exchange market is the market for buying and selling different currencies. It is primarily an over-the-counter market with trades between large commercial banks accounting for most foreign currency transactions. Other participants in the foreign exchange market include:

  • brokers, who match buyers and sellers in the market
  • customers of banks or brokers, mainly large businesses who engage in international trade and/or investment, and
  • central banks

Question: Where can I find more information about the foreign exchange market?

Answer: The Federal Reserve Bank of New York website has a document on foreign trade and foreign exchange including a chapter, Foreign Currency Exchange, that discusses the basics of the foreign exchange market.



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