Agency bonds provide you with a safe way to invest in bonds because they are backed by government agencies. Here are a few different types of agency bonds that are available.

1. Floater

One type of agency bond is known as a floater. This is a type of agency bond that has an adjustable interest rate that is paid. Typically, the interest rate is going to be tied to some type of financial index such as the LIBOR, and it will have a maximum rate that will be paid.

2. Step-up

Another type of agency bond is known as a step-up bond. With this type of agency bond, your bond is going to have a step-up that occurs with your interest rate periodically. This is done as a benefit to investors so they can minimize interest rate risk with their bond.

3. Discos

Some agency bonds are known as discos. These types of bonds have no coupon discount rate associated with them. With this type of agency bond, you are going to buy them for less than the face value. Then after a certain amount of time, the bond will mature and you will be able to redeem it for the face value.

blog comments powered by Disqus
Scottrade