GSE bonds can boost cash flow
Wednesday, July 2nd, 2008The housing crisis, credit crunch and the reaffirmed backing by the federal government of the beaten-up housing giants Freddie Mac and Fannie Mae could provide an investment opportunity for those looking for better yields.- advertisement -
Sometimes the search for decent yields in a low-rate environment can lead to taking too much risk. Government-sponsored enterprises, or GSEs, issue bonds that can provide some intriguing yields and yet they’re close to top-tier investments when it comes to safety.
GSE bonds are not totally risk-free, but none have defaulted, and many people believe the government wouldn’t allow a default. We still don’t know if they’ll always be in the “too big to fail” category, but the government certainly appears to have put them there for the foreseeable future with the announcement that billions of dollars will be available to shore up the institutions, should they need it.