Whither agency bonds?

Agencies are paying up to 4.3% for 3-5 years, and higher for longer terms. I’m really not seeing many drawbacks relative to a CD, with the significant exception of call provisions that allow the issuer to redeem the bonds prior to the stated maturity date.

These bonds backed by the “full faith and credit” of the US and are potentially liquid on the secondary market (although the latter point is somewhat unclear). What are your thoughts?



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I have not done agency bonds recently. What worked for me in the past was purchase of this or that agency’s callable bonds at a discount after studying the call patterns of that agency. Natch the YTM also has to be right.

When you’re able to pick up such discount bonds and score a par call shortly thereafter, it’s pretty sweet. :slightly_smiling_face:

The above aside and speaking of agency bonds generally, it is important always to ascertain in advance the state and local taxability of the agency in question. Some agency bond interest is state and local taxable, other is not. Know in advance which you are buying.

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Thanks for the breakdown. How did you learn more about this space and is there an online community for it?

I apologize for having misled you. I am not currently operating in the agency bond space and have not done so for a few decades. Which is certainly not advice for you to avoid such bonds. I like 'em every bit as much as ever. But I’m not up to speed regarding stuff like online discussion groups and so forth.

My opinion is worth every cent it is costing you. But in my view US Government agency bonds are safe, safe, safe. This despite outcrys you might hear to the contrary. So if you’re able to beat treasury interest rates, and provided (again) that you ascertain in advance exemption from state and local taxation . . well . . I think you’re on to something good. :slightly_smiling_face: