Over 700 finance terms, Shmooped to perfection.
Fannie Mae needs money. It has gotten the A-OK from her own managers to issue bonds - but the FEDERAL government doesn't want to be involved, or at least not guarantee the bonds the way they do T-Bills. What's an agency to do? They pay a little higher interest. Fannie, Freddie and other quasi-governmental agencies come under the "agency bond" tent this way.