An examination of federal agency debt pricing practices

Debt issuance procedures for federally sponsored agency securities differ considerably from the methods used by the U.S. Treasury and most corporate and municipal debt issuers. This paper examines the debt issuing procedures of the three major federally sponsored agencies and the efficiency with which the fiscal agents for those agencies price new debt issues. The conclusions from the analysis are: (1) fiscal agents for the major federally sponsored agencies are extremely adept at estimating the equilibrium competitive yields for new debt issues; (2) pricing errors on new issues are generally due to factors beyond a fiscal agent's control, such as the volatility of debt market conditions; and (3) the debt pricing practices for federally sponsored agency securities are efficient and effective.