Business Glossary

securities issued by U.S. governmentsponsored entities (GSEs) and federally related institutions.

GSEs currently issuing securities comprise eight privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association (FNMA), Student Loan Marketing Association (SLMA), Financing Corporation (FICO). GSEs issue discount notes (with maturities ranging from overnight to 360 days) and bonds. With the exception of the Farm Credit Financial Assistance Corporation, GSE securities are not backed by the full faith and credit of the U.S. government. Other GSEs that formerly issued directly now borrow from the Federal Financing Bank.

Federally related institutions are arms of the U.S. government and generally have not issued securities directly into the marketplace since the Federal Financing Bank was established to meet their consolidated borrowing needs in 1973. They include the Export-Import Bank (Eximbank) of the United States, the Commodity Credit Corporation, the Farmers Housing Administration, the General Services Administration, the government national mortgage association (GNMA), the Maritime Administration, the Private Export Funding Corporation, the Rural Electrification Administration, the Rural Telephone Bank, the Small Business Administration (SBA), the Tennessee Valley Authority (TVA), and the Washington Metropolitan Area Transit Authority. Except for the Private Export Funding Corporation and the TVA, federally related institution obligations are backed by the full faith and credit of the U.S. government.

Agency securities are exempt from SEC registration and from state and local income taxes.

negotiable debt obligations of the U.S. government, secured by its full faith and credit and issued at various schedules and maturities. The income from Treasury securities is exempt from state and local, but not federal, taxes.

1. Treasury bills-short-term securities with maturities of one year or less issued at a discount from face value. Auctions of 91-day and 182-day bill take place weekly, and the yields are watched closely in the money markets for signs of interest rate trends. Many floating-rate loans and variable-rate mortgages have interest rates tied to these bills. The Treasury also auctions 52-week bills once every four weeks. At times it also issues very short-term cash management bills, Tax Anticipation Bills, and treasury certificates of indebtedness. Treasury bills are issued in minimum denominations of $10,000, with $5,000 increments above $10,000 (except for cash management bills, which are sold in minimum $10 million blocks). individual investors who do not submit a competitive bid are sold bills at the average price of the winning competitive bids. Treasury bills are the primary instrument used by the Federal Reserve in its regulation of money supply through open market operations. See also dutch auction-repurchase agreement.
2. Treasury bonds-long-term debt instruments with maturities of 10 years or longer issued in minimum denominations of $1,000.
3. Treasury notes-intermediate securities with maturities of 1 to 10 years. Denominations range from $1,000 to $1 million or more. The notes are sold by cash subscription, in exchange for outstanding or maturing government issues, or at auction.