Agency and GSE Bonds

[foghorn]

I have a potion of my taxable money in a CD ladder and other short term investments.  I have been doing some homework lately on chasing a bit more more yield and exploring individual bonds. 

BBB rated bonds would pay more (of course) but come with greater risk of default.  I have noticed that Agency and GSE bonds pay more than CD's and are considered extremely safe.

Does anyone have any experience with Agency/GSE bonds?  Anything I should be looking out for that I may not be considering?  Any "lessons learned"?

BTW - I would hold until maturity and these would be used as a replacement for the CD's as those CD's mature and get rolled over.

Thank you.

[MustacheAndaHalf]

Two of the most famous government entities are both involved in residential real estate loans... are you looking at mortgage-backed bonds?

[foghorn]

Thank you for your reply.

Yes, those are possibilities.  I see several choices when I look for for Agency/GSE bonds on my Fidelity website.

It is my understanding that Agency and GSE bonds are either backed by the government - OR - assumed to be backed by the government as the government would not let them default.

I appreciate your review of my questions.

[MustacheAndaHalf]

I'd avoid mortgage backed bonds, since they mostly capture the downside of interest rate changes.  When interest rates fall, what do people do with their mortgage?  Pay it off and take out a new one.  That's your bond they pay off, and you get your money back - after rates fall.  If rates go up (and you're missing out on better rates), people are unlikely to refinance.