US Agency bonds

[chang]

Fido shows a 5-year bond from FEDERAL HOME LN MTG CORP MTN paying an estimated 5.5%.

Interesting that a AAA-rated US agency bond pays so much more than 5-year Treasuries (3.91%) or even BBB-rated corporate bonds (5.12%).

See median yields:
fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yield

(The median 5-year agency yield is 4.42%, so something must be up with that FHLMC bond! It's projected yield is even higher than the 5.34% if you switch the view from "Median Yield" to "Highest Yield".) 

[sabino]

Are agency bonds safe (guaranteed by the federal government)?
The current yield is pretty high: from Fidelity:
FEDERAL FARM CR BKS BOND 6.24000% 03/29/2034
Expected Price=100.000
Expected Yield=6.240%

[Fearchar]

No.  More details available in link from Vanguard: Agency Bonds

"GSE debt is not guaranteed by the U.S. government. GSE debt is solely the obligation of the issuer and carries greater credit risk than U.S. Treasury securities."


Greater risk is fundamentally why they have higher yields, but these are not high risk (junk) by any means.

[Capital]

In addition to what Fearchar posted, make sure you check on the Call Protection. In the event that is a consideration to you, some do have call provisions.

[sabino]

Thanks Freachar and Capital.
Too risky to get another 1% over a CD.