Conservative investors opt for debt securities not only because they safeguard the capital invested but also because they provide regular income flows. Bonds bring a significant amount of stability to an equity-heavy portfolio while providing dividends more frequently than individual bonds. U.S government bonds mutual funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered to be the safest in the bond mutual fund category and are ideal options for the risk-averse investor.
Below we will share with you the 5 highest yielding Zacks #1 ranked 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. To view the Zacks Rank and past performance of all government bond mutual funds, then click here.
| Mutual Fund | SEC Yield |
| Oppenheimer US Government A | 4.77% |
| Putnam American Government Income A | 4.21% |
| Vanguard Long Term Treasury Investor | 4.13% |
| ISI North American Government Bond A | 3.84% |
| Dreyfus US Treasury Long Term A | 3.8% |
Oppenheimer US Government A (OUSGX) invests the majority of its assets in U.S. government debt securities. Debt securities issued or guaranteed by the U.S. Treasury constitute the fund’s major investments. It invests heavily in asset-backed derivatives such as collateralized mortgage obligations and mortgage participation certificates. The government bond mutual fund has a three year annualized return of 3.88%.
The Fund Manager is Peter A. Strzalkowski and he has managed this government bond mutual fund since 2009.
Putnam American Government Income A (PAGVX) seeks high current income with a secondary objective of capital preservation. At least 80% of its assets are used to purchase U.S. government securities. Up to 20% of its assets are invested in asset-backed private securities, including those issued by money-market funds. These securities must have been assigned the highest investment grade rating by a prominent ratings firm at the time of purchase. The government bond mutual fund returned 12% over the last one year period.
As of June 2010, this government bond mutual fund held 412 issues, with 29.75% of its total assets invested in GNMA 5%.
Vanguard Long-Term Treasury Investor (VUSTX) invests heavily in U.S Treasury securities. Bills, bonds and notes issued by the U.S. Treasury constitute its major investments. The securities held by the fund have maturities ranging from 15 to 30 years. The government bond mutual fund returned 10.93% in the last one year period and has a ten year annualized return of 7.48%.
The government bond mutual fund has a minimum initial investment of $3,000 and an expense ratio of 0.25% compared to a category average of 0.92%.
ISI North American Government Bond A (NOAMX) seeks high current income along with a reasonable level of risk. The majority of its assets are utilized to purchase a wide range of bonds rated investment grade which are issued or guaranteed by the U.S, Canadian and Mexican governments. The government bond mutual fund has a five year annualized return of 5.86%.
The Fund Manager is R. Alan Medaugh and he has managed this government bond mutual fund since 1993.
Dreyfus US Treasury Long-Term (DRGBX) invests a substantially high proportion of its assets in securities issued or guaranteed by the U.S. government or its agencies. The fund may consider entering into repurchase agreements and has an average maturity period of at least 10years.The government bond mutual fund returned 7.85% over the last one year period and has a three year annualized return of 7.63%.
The government bond mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.65% compared to a category average of 0.92%.
To view the Zacks Rank and past performance of all government bond mutual funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/
