Risk Considerations

No Government Guarantees

Debt securities issued by Agencies are solely the obligation of the issuer and, unless explicitly stated, do not carry any guarantee by the sponsoring government. There are certain government agencies (e.g., Ginnie Mae) whose securities have the full faith and credit guarantee of the U.S. government. Generally, though, most Agency and Supranational issuers do not.

Interest Rate Risk

Typically, Agency and Supranational debt securities preserve investors' principal if purchased at par and held to maturity. However, investors who sell these bonds prior to maturity will be exposed to interest rate risk. Like all bonds, Agency debt securities tend to rise in value when interest rates fall and decline in value when interest rates rise. Typically, the longer maturities have a greater degree of price volatility. If the bonds are callable, the price volatility will be influenced by, among other things, the maturity, the call date, and the prevailing level of interest rates.

Call Risk

Issuers typically exercise call options in periods of declining rates, thereby creating reinvestment risk for the investor. On the other hand, if an investor expects a security to be called and it is not, the investor faces an effective maturity extension that may or may not be desirable.

Liquidity Risk

A liquid and active secondary market exists for most Agency and Supranational debt obligations. Secondary market prices are provided by many dealers, and a number of electronic exchanges list Agency and Supranational debt on their systems. However, many debt issues are customized, and this customization can make it difficult to find a buyer for certain Agency issues.

Caution on Tax and Accounting Issues

The interest income on Agency and Supranational debt securities is subject to federal income tax with exemption from state and local taxes varying by agency and state. Investors should consult their tax advisors when researching their particular situation. InspereX does not provide tax or legal advice.

 


InspereX LLC and its affiliates explicitly disclaim any responsibility for product suitability or suitability determinations related to individual investors. This information should not be regarded by recipients as a substitute for the exercise of their own independent judgment, and the information provided herein is not an offer, solicitation or a recommendation to buy, sell, or hold any security or investment strategy. There can be no assurance that the investments shown herein were or will be profitable, and this material does not take into account any investor’s investment objectives, financial situation, particular needs, strategies, tax status or time horizon. Investors must refer to the respective offering documents and pricing supplements for complete and current information relating to Survivor’s Options discussed herein and the specific terms related thereto. This material provides only an overview of particular Survivor’s Options provisions, is subject to change without notice and may not be relied upon for an understanding of the obligations of the issuer or rights of any note holder.

Any financial product sold prior to maturity may be worth more or less than the original amount invested. Depending upon the specific product offering, investment risks include, but are not limited to, interest rate risk, credit risk, call risk and liquidity risk. Additionally, the products discussed herein are not FDIC insured, may lose value, and are not bank guaranteed. Investors should refer to the offering documents for applicable risk considerations.

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy securities. Investment products described herein may not be offered for sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful or prohibited by the specific offering documentation.