Fannie Mae and Freddie Mac are associated with which type of bonds?

Fannie Mae and Freddie Mac are associated with Ginnie Mae bonds because they are both government-sponsored enterprises (GSEs) that play a crucial role in the mortgage market. These entities were created to enhance the flow of credit to the housing sector and increase the availability of mortgage loans, primarily through the securitization process.

Ginnie Mae, on the other hand, is a government agency that backs mortgage securities and ensures that investors in these securities receive timely payments. While Fannie Mae and Freddie Mac issue their own mortgage-backed securities, they are specifically known as agency bonds because they are backed by the U.S. government or the GSEs themselves. This guarantees a level of safety for investors, as these securities carry a low risk of default.

The other options do not accurately represent the association of Fannie Mae and Freddie Mac. Corporate bonds are issued by private companies, municipal bonds are issued by local governments, and zero-coupon bonds do not pay periodic interest but are sold at a discount and redeemed at face value at maturity. Understanding the role of Fannie Mae and Freddie Mac in the mortgage-backed securities market solidifies the connection to Ginnie Mae bonds, highlighting their importance in financing homeownership.