Top 5 Government Bond Mutual Funds (Feb. 2011)

Government bond mutual funds are considered to be the safest class of investments in the bond fund category. These funds mostly hold securities issued by the US Treasury and other government agencies which are backed by the full faith and credit of the US government. Yields from these instruments are typically low but the associated risk is also much smaller. In addition, many of these instruments are exempt from state and local taxes. By holding widely diversified portfolios of these investments, mutual funds contribute significantly to the safety associated with them.

Below we will share with you 5 top rated government bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Legg Mason Western Asset Government Securities A (SGVAX) invests the majority of its assets in securities issued by the U.S. government and its agencies. U.S. Treasury securities and debt securities issued by federal agencies are some of the categories the fund invests in. The government bond mutual fund has a five year annualized return of 5.54%.

The government bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.92% compared to a category average of 1.00%.

Sit US Government Securities (SNGVX) seeks to provide current income and safety of the capital invested. The fund only purchases U.S. government securities or instruments issued by its agencies or instrumentalities. The government bond mutual fund returned 4.32% over the last one year period.

As of December 2010, this government bond mutual fund held 671 issues, with 3.80% of its total assets invested in FNMA 7%.

Oppenheimer Limited-Term Government A (OPGVX) invests the majority of its assets in domestic government securities, repurchase agreements on such instruments as well as synthetic instruments to manage risk. Not more than 20% of its assets are utilized to purchase mortgage-backed securities. The government bond mutual fund has a ten year annualized return of 3.25%.

The Fund Manager is Peter A. Strzalkowski and he has managed this government bond mutual fund since 2009.

Managers Intermediate Duration Government (MGIDX) seeks total return greater than the returns of major indices for asset backed securities. The majority of its assets are used to purchase bonds issued by the U.S. Government and its agencies. The government bond mutual fund has a three year annualized return of 6.15%.

The government bond mutual fund has a minimum initial investment of $2,000 and an expense ratio of 0.89% compared to a category average of 1.00%.

GMO Inflation Indexed Plus Bond III (GMITX) invests heavily in inflation-protected securities and related investments. The fund aims to provide total return greater than the Barclays Capital U.S. Treasury Inflation Notes index. The government bond mutual fund returned 11.62% over the last one year period.

The Fund Manager is Thomas Cooper and he has managed this government bond mutual fund since 2006.

To view the Zacks Rank and past performance of all government bond mutual funds, then click here.

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