Agency debt can be a compelling alternative proposition for some Treasuries in a high quality fixed income portfolio, though the decision hinges on investor’s desire to sell convexity and liquidity, notes Morgan Stanley. In their September 26 research piece titled “The Debenture Code,” Jay F Bacow and team delve deep into the agency debenture market to explore issuance and valuation.
Outstanding agency debt stands at about $2.1 trillion
Bacow and colleagues highlight that agency debt or debentures are issued by government-sponsored entities, though they are not backed explicitly by the government. They point out that the largest debt issuances are accounted by the Federal Home Loan Bank System (FHLBs), Freddie Mac, Fannie Mae and a few others. The analysts note...
