Agency Notes
October 23rd, 2009
Agency Discount Notes – FAQs II
6. How are Agency discount note yields quotes?
Agency Discount Notes are quoted in terms of a discount yield, the same way as Treasury Bills.
Agency Discount Notes can provide a significant yield advantage over Treasury Bills, as shown, for example:
| US T Bills | Agency Discount Notes | Yield Advantage | |
|---|---|---|---|
| 3-month | 1.10% | 1.20% | 9% |
| 6-month | 1.15% | 1.25% | 9% |
7. What type of investor might be interested in Agency Discount Notes?
Individuals seeking a short term cash equivalent investment, who place a high priority on principal preservation and want yields that are higher than those available through Treasury Bills.
8. Which Agencies feature tax exemptions?
Interest on FFCB and FHLB issues is generally state and local tax free.
This provides a yield advantage over fully taxable securities and is especially appealing to residents of high-tax states. FHLMCs and FNMAs are fully taxable.
9. What are their minimum investment requirements?
Minimums range from $1,000 to $100,000, depending on the issue.
10. How liquid are Agency Discount Notes?
The Agency market is active enough to provide liquidity for investors who choose to sell their Discount Notes before maturity.
Posted in 
Tags: