What does Agency MBS mean？

Agency MBS stands for Agency Mortgage-Backed Securities. These are securities that are created by pooling together residential mortgages that are guaranteed by government-sponsored enterprises (GSEs) such as Fannie Mae, Freddie Mac, and Ginnie Mae. The GSEs purchase the mortgages from lenders, pool them together, and then sell them to investors as securities. The payments made by the homeowners on their mortgages are then passed through to the investors in the form of interest and principal payments. Agency MBS are considered to be relatively safe investments because they are guaranteed by the US government, which means that investors are protected against default risk.