U.S. government bond funds usually invest in Treasury bills, notes and securities issued by government agencies. These are considered the safest in the bond fund category and are ideal options for a risk-averse investor. Mutual funds from this category seek to pay out dividends more frequently than individual bonds.
Meanwhile, long-term bond funds are believed to have average maturity period between 10 and 30 years. Fixed income securities with an average maturity period between 3 and 10 years are classified as intermediate securities, while the short term can be maximum 5 years.
Below we will share with you three top-rated all-cap government bond mutual funds. Each has earned a Zacks Mutual Fund #1 Rank (Strong Buy) and is expected to outperform its peers in the future. To view the Zacks Rank and past performance of all government bond mutual funds, investors can click here to see the complete list of funds .
Dreyfus US Treasury Long-Term (DRGBX – MF report) seeks total return with capital growth and current income. DRGBX invests a large portion of its assets in U.S. Treasury instruments. The fund may also invest in other instruments which are approved by the domestic government or issued by its entities. Generally, DRGBX has a duration of more than or equal to 7.5 years and a minimum of 10 years of dollar-weighted average portfolio maturity. DRGBX offers dividend every month and capital gains annually. The Dreyfus US Treasury Long-Term fund has a three-year annualized return of 4.4%.
As of January 2016, this fund held 22 issues with 11.5% of its assets invested in US Treasury Bond 2.5%.
American Funds US Government Securities R6 (RGVGX – MF report) invests the majority of its assets in securities that are backed by the U.S. government or its affiliates. RGVGX invests in bonds and other dollar-denominated debt securities. The fund may also show interest in mortgage-backed securities of federal agencies that are not guaranteed by the U.S. government. American Funds US Government Securities R6 is an intermediate government fund, with a three-year annualized return of 2%.
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