Top 10 Best Government Bond Mutual Funds 2012

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Bond mutual funds can be attractive for income seeking investors. There are various bond mutual funds. One of the safest bond funds is government bond mutual funds. Some of the best government bond mutual funds are: Wasatch-Hoisington US Treasury, PIMCO Long-Term US Government A, T. Rowe Price US Treasury Long-Term, etc. More fund review can be found below.

Intro

There are two major types of bond mutual funds. They are government bond funds and corporate bond funds. These bond funds can be either U.S. bond funds or foreign bond funds. Government bond mutual funds are considered to be the safest class of investments in this fixed income fund category. These funds mostly hold a portfolio of securities issued by the US Treasury and other government agencies. These government bonds are backed by the full faith and credit of the US government.

Compare to corporate bond funds, these government bond funds have low yields hence the associated risk is also much smaller. In addition, many of these fixed incomes are exempt from state and local taxes. Using mutual funds, investor can get a well-diversified portfolio and significantly reduce the risk associated with their investment.

Best Government Bond Mutual Funds

The following best performing mutual funds are sorted based on its long term performance. You can also find other fund review information such as: fund management, yield, expense ratio, investment objective, top sector, performance, etc.

Top 10 Best Government Bond Mutual Funds of 2012 are:
  1. Wasatch-Hoisington US Treasury (WHOSX)
  2. PIMCO Long-Term US Government A (PFGAX
  3. T. Rowe Price US Treasury Long-Term (PRULX)
  4. Fidelity Spartan Long-Term Treasury Bond Index Investor (FLBIX)
  5. Vanguard Long-Term Treasury Investor (VUSTX)
  6. American Century Zero Coupon 2025 Inv (BTTRX)
  7. American Century Zero Coupon 2020 Inv (BTTTX)
  8. Fidelity Spartan Interm Tr Bd Idx Inv (FIBIX)
  9. BlackRock US Mortgage Portfolio A (BMPAX)
Updated on 4/13/2012

1. Wasatch-Hoisington US Treasury (Ticker: WHOSX)

The Wasatch-Hoisington US Treasury fund investment objective is to achieve a rate of return that exceeds the rate of inflation over a business cycle by investing in U.S. Treasury securities with an emphasis on both income and capital appreciation. This WHOSX fund utilizes its assets to purchase U.S. Treasury securities and its instrument.

Wasatch-Hoisington US Treasury
This top performer government bond mutual fund has been rated with 3-stars rating by Morningstar. It has total net assets of $246.15 million. This Wasatch fund was first introduced to public in 1986. It is currently managed by Van Robert Hoisington. Hoisington has been managing it since its inception. The fund has annual expense ratio of 0.75%. This fixed income mutual fund has a dividend yield of 2.86%. The 1-year annualized return is 39.46%.

As of January 2012, this long government fund has a total of 16 holdings. The effective duration is 20.2 years and the weighted average maturity is 24.8 years. The top U.S. treasury holdings are U.S. Treasury Strip (principal only), U.S. Treasury Bond, etc. The top ten holdings represent 83.9% of the total portfolio.

2. PIMCO Long-Term US Government A (Ticker: PFGAX)

The investment aim of PIMCO Long-Term US Government fund is to provide maximum total return consistent with capital preservation and prudent investment management. This mutual fund invests majority of assets (>80%) in a diversified portfolio of U.S. government and its agency fixed income securities. It may invest in derivative instruments like options, futures contracts or swap agreements, or in mortgage-backed securities. It may also invest small part of its assets (<10%) in preferred stocks.

The total net assets of this PIMCO fund are $1.38 billion. Stephen Rodosky is the current lead manager. The most current distribution of the dividend was in February 29, 2012 ($0.03).

Morningstar has ranked this best mutual fund with 4-star rating for its performance since 1997. This best government bond fund has 12 years of positive return. It has its best 1-year total return in 2011 with 27.62%. Based on load adjusted return, this fund has return 21.50% over the past 1-year and 7.95% over the past 10-year.

The sector diversification of this mutual fund as per the market value weighted is Government bond or Treasury (77%), Government Agency bond (11%), Mortgage (11%), Municipal (1%) and Investment Grade Credit (1%). The fund’s benchmarks are Barclays Capital Long-Term Treasury Index and Lipper General U.S. Government Fund Average.

3. T. Rowe Price US Treasury Long-Term (Symbol: PRULX)

T. Rowe Price US Treasury Long Term
This T. Rowe Price US Treasury Long-Term fund invests most of its net assets in U.S. Treasury securities, which are backed by the full faith and credit of the federal government. It typically maintains a weighted average maturity between 15 and 20 years, but may range from 10 to 30 years.

The annual expense ratio of this top government bond mutual fund is 0.55%. It is a bit lower compared to the average in the Long Government category (0.84%). The 10-year annualized return of this PRULX fund is 7.88%. There is no management fee for investing in this fund.

Investors just need a minimum of $2,500 to open a brokerage account. This bond mutual fund can be purchased from 81 brokerages. The fund has dividend yield of 3.05%.

Best Performer Diversified Bond Mutual Funds

As of December 2011, the asset allocation of this no load mutual fund is 99.7% in Domestic Bond and 0.3% in Cash. The sector diversifications as of February 2012 are U.S. Treasury Bonds & Notes (84.5%), Mortgage-Backed Securities (11.2%), Treasury Inflation-Protected Securities (4.0%) and Cash Equivalents (0.3%).

4. Fidelity Spartan Long-Term Treasury Bond Index Investor (FLBIX)

The investment objective of Fidelity Spartan Long-Term Treasury Bond Index fund seeks a high level of current income. This top mutual fund uses its assets to buy securities included in the Barclays Capital U.S. Long Treasury Index. This index mutual fund maintains a dollar-weighted average maturity of 10 years or more. This Fidelity mutual fund uses statistical sampling techniques on duration, maturity, interest rate sensitivity, etc to match the index benchmark.

This government bond fund has a 3-year annualized return of 9.97% and a 5-year annualized return of 9.79%. The fund manager is Curt Hollingsworth. This best performing fund was ranked with 4-stars rating by Morningstar. The annual holdings turnover of this fund as of March 13, 2012 is 77.0%. This is much lower compared to the average in the Long Government category (690.00%). The annual expense ratio is only 0.10%, compared to the category average of 0.84%. There is no management fee and no sales charge for investing in this bond mutual fund.

As of December 2011, the fund has a total of 36 holdings. The top issuer is United States Treasury which is 99.4% of the portfolio. The weighted average maturity as of February 2012 is 24.1 years with average duration of 16 years. The fund CUSIP is 315911826.

5. Vanguard Long-Term Treasury Investor (VUSTX)

The Vanguard Long-Term Treasury fund's objective is to provide a high and sustainable level of current income. This Vanguard fund invests most of assets in U.S. Treasury securities, which include bills, bonds, and notes issued by the U.S. Treasury. It also will maintain a dollar-weighted average maturity of 15 to 30 years.

Top 10 High Yield Bond Mutual Funds

Vanguard Long Term Treasury
This Vanguard fund has an annual expense ratio of 0.22%. This fee is considered as one of the lowest expense ratio in this list. David R. Glocke has been the fund manager since May 2001. The minimum initial investment for brokerage or IRA account is $3.000 with minimum subsequent investment of $100. There are 90 brokerages which offer this mutual funds. The brokerages are E Trade Financial, JP Morgan, T Rowe Price, Schwab Retail, Vanguard NTF, etc.

This government bond fund has an average maturity of 21.4 years and an average duration of 15.0 years. The benchmarks of this bond fund are Barclays Capital U.S. Long Treasury Bond Index and Barclays Capital U.S. Aggregate Bond Index. It has a 5-year annualized return of 9.73%.

6. Dreyfus US Treasury Long-Term (DRGBX)

The Dreyfus US Treasury Long-Term fund invests majority of net assets in U.S. treasury securities. The fund keeps an effective duration of 7.5 years or more, and a dollar-weighted average portfolio maturity of 10 years or more.

The total net assets of this government bond fund are $79.45 million. It has 3-stars rating from Morningstar. The fund has dividend yield of 3.16%. The fund is currently managed by Robert Bayston. The fund has no management fee and no sales charge. If you have a brokerage account, you will need a minimum of $2.500 to invest in this Dreyfus fund. As of January 2012, this best bond fund has a total of 20 holdings.

7. American Century Zero Coupon 2025 Inv (BTTRX)

This American Century Zero Coupon 2025 fund is rated with 3 stars rating by Morningstar. It also has a yield of 3.3%. The total net assets are $171 million. The annual turnover rate is 39%. This long term government bond fund has an expense ratio of 0.56%.

This bond fund has returned 11.49% over the past 3 years, 9.46% over the past 5 years, and 9.69% over the past 10 years. For 2011, this fund is ranked 43% in its category.

8. American Century Zero Coupon 2020 Inv (BTTTX)

American Century Zero Coupon 2020
This American Century Zero Coupon 2020 fund’s objective is to provide the highest return by investing in U.S. Treasury securities. This government bond fund is managed by Robert V. Gahagan, Brian Howell, and James E. Platz. It also has a yield of 2.94%. It is open to new investors. Morningstar has rated this fund with 5 stars rating.

As of January 2012, the top 3 sectors of this BTTTX fund are U.S. Treasury (52.57%), U.S. Agency (45.58%), and Non-U.S. Government (1.33%). The fund’s annual holding turnover rate is 35%.

9. Fidelity Spartan Intermediate Term Bond Index Inv (FIBIX)

As part of index bond mutual fund, this Fidelity Spartan Intermediate Term Bond Index fund uses its assets to buy securities included in the Barclays Capital U.S. 5-10 Year Treasury Bond Index. This top performing intermediate government bond fund has a yield of 2.37%. It also has total net assets of $1.2 billion. The minimum initial investment is $10,000.

This FIBIX fund has a 5-year annualized return of 7.95%.

10. BlackRock US Mortgage Portfolio A (BMPAX)

BlackRock US Mortgage Portfolio fund has a yield of 3.51%. The annual expense ratio is 1.29%. The minimum initial investment is $ 1,000. It also has a sales load of 4%. This intermediate government fund has an average effective duration of 0.71 years and an average effective maturity of 4.24 years.

As of January 2012, the top 5 sectors of this mortgage bond fund are: Agency MBS Pass-Through (17.63%), Other Government Related (10.32%), Non-Agency Residential MBS (8.82%), Asset-Backed (3.33%), and Agency MBS CMO (1.24%).

Disclosure: No Position

Other Top Bond Mutual Funds of 2012 articles:
Fund Performance

NoNameTicker1 Year Return %3 Year Return %5 Year Return %10 Year Return %Expense Ratio
1Wasatch-Hoisington US TreasuryWHOSX39.46%10.75%11.43%9.49%0.75%
2PIMCO Long-Term US Government APFGAX26.23%13.54%10.40%8.37%0.82%
3T. Rowe Price US Treasury Long-TermPRULX27.11%10.17%10.09%7.88%0.55%
4Fidelity Spartan L/T Tr Bd Idx InvFLBIX27.97%9.97%9.79%-0.20%
5Vanguard Long-Term Treasury InvVUSTX28.13%10.21%9.73%8.23%0.22%
6Dreyfus US Treasury Long-TermDRGBX27.86%9.85%9.50%7.35%1.02%
7American Century Zero Coupon 2025 InvBTTRX29.09%11.49%9.46%9.69%0.56%
8American Century Zero Coupon 2020 InvBTTTX19.34%10.68%9.25%9.16%0.56%
9Fidelity Spartan Interm Tr Bd Idx InvFIBIX13.15%6.64%7.95%-0.20%
10BlackRock US Mortgage Portfolio ABMPAX6.78%10.76%7.70%-0.94%
11T. Rowe Price US Treasury IntermPRTIX10.57%6.18%7.60%5.64%0.51%
12Putnam American Government Income APAGVX5.67%9.47%7.51%5.35%0.85%

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