A publicly traded, shareholder-owned corporation that was federally chartered by an act of Congress in 1988. Farmer Mac's mission is to establish a secondary market for agricultural real estate and rural housing mortgage loans, as well as to increase the availability of long-term credit at stable interest rates for American farmers, ranchers and rural homeowners. To fulfill its mission, Farmer Mac purchases newly originated and seasoned agricultural loans from lenders, issues long-term standby commitments to purchase agricultural mortgage loans, exchanges loans for mortgage-backed securities through a swap program, and purchases and guarantees mortgage bonds backed by eligible agricultural mortgage loans. |||Farmer Mac's programs and mission are very similar to Fannie Mae's and Freddie Mac's programs and missions for traditional residential mortgages. Farmer Macs was established to provide a liquid secondary market for agricultural mortgages, thereby lowering interest rates and providing a stable flow of funds to agricultural borrowers. This is similar to how Fannie Mae and Freddie Mac were established to provide similar benefits to the residential mortgage market.
A type of bond that accrues interest if the embedded index or interest-rate option underlying the bond remains within a specified range. The fairway in golf is like the index or interest rate range. The outlook is positive if the ball lands on the fairway; if a ball lands in the rough, the outlook is negative. Also known as "corridor bond", "index range note", "range accrual note", or "index floater". |||Conservative investors tend to choose this type of bond in the hope of maximizing their yield when they believe that the option will remain within a certain range during the time the bond is held. Investors may profit the most during a sideways market. Should the option remain out of range, the least the investor can expect is a return of principal.
A type of investment firm that issues debt securities to its investors. These securities are called face-amount certificates and are backed by security interest on assets such as real property or other securities. This is similar in nature to mortgage bond debt financing. |||This technique allows a company to obtain financing at relatively low interest rates, since its debt is backed by specific tangible assets under the company's control. Investors who hold face-amount certificates are usually paid a fixed amount of annual interest and are refunded the principal (or face amount) of their securities at a specified termination date.
A provision which gives a bond issuer the right to call the bonds due to a one-time occurrence, as specified in the offering statement. The circumstances could range from natural disasters and cancelled projects to almost anything else. Also known as an "extraordinary call" or "extraordinary redemption provision". |||Some municipal bonds are issued with an extraordinary redemption provision.
A spread in the futures markets created by taking offsetting positions in futures contracts for five-year treasury bonds and long-term (15-30 year) treasury bonds. |||A FAB spread is created by either buying a futures contract on five-year treasury bonds and selling one long-term treasury bonds or vice versa. Investors speculating on interest rate fluctuations will enter into this type of spread in hopes of under or overpriced treasuries.
An international credit rating agency based out of New York City and London. The company's ratings are used as a guide to investors as to which investments are most likely going to yield a return. It is based on factors such as how small an economic shift would be necessary to affect the standing of the bond, and how much, and what kind of debt is held by the company. |||Along with Moody's and Standard & Poor's, Fitch is one of the top three credit rating agencies. Its rating system is very similar to S&P's in that they both use a letter system. Some examples of letter ratings include:AAA - reliable and stableAA - quality with a bit higher risk A - economic situation could affect finance BBB - middle class-an acceptable riskBB - more prone to economic changes CCC - vulnerable, dependent on current economic situation D - has defaulted before, high risk to again
An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. |||A fairly good financial instrument for those looking to receive a fixed investment income.
A spread in the futures markets created by taking offsetting positions in futures contracts for five-year treasury notes and ten-year treasury bonds. |||A FAN spread is created by either buying a futures contract for five-year treasury notes and selling a futures contract for ten-year treasury bonds or vice versa. Investors speculating on interest rate fluctuations will enter into this type of spread in hopes of under or overpriced treasuries.
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