Highly Rated Government Bond Funds

Investors who are looking for bond funds which offer safety and income might consider U.S. government bond funds. These funds, which typically hold U.S. Treasuries, Government Agency paper, Mortgage-backed government entity securities, or other AAA-rated investments, are considered less risky than bond funds which invest in corporate bonds or corporate notes. The shorter the duration (average maturity of holdings) of a fund - the less price fluctuation that can be expected. Listed below are government bond funds from large established fund families which are rated 4 or 5 stars by Morningstar:

Government Bond Funds
Funds which invest in short term government securities including U.S. Treasuries and mortgage-backed government securities.

Morgan Stanley U.S. Government (USGAX) - yield 4.51%, holds 100% securities rated AAA primarily U.S. Treasuries and government mortgages securities, average maturity of holdings 6.30 years, YTD return 3.23%, minimum investment $1,000

JP Morgan Treasury and Agency Select (OMBAX) - yield 4.54%, holds 99% securities rated AAA primarily government mortgages securities, average maturity of holdings 4.5 years, YTD return 3.49%, minimum investment $10,000

Vanguard GNMA (VFIIX) - yield 5.22%, holds 100% securities rated AAA primarily Ginnie Mae securities, average maturity of holdings 7.10 years, YTD return 3.68%, minimum investment $3,000

Inflation-Protection Government Funds
Fund which specifically target offering a return that exceeds or matches inflation are available for investors who might need inflation protection in their portfolio.

Franklin Real Return A (FRRAX) - yield 3.31%, YTD return 7.24%, $1,000 minimum investment

DWS Inflation Protected Plus (TIPIX) - yield 4.87%, YTD return 6.77%, $1,000,000 minimum investment

State Farm Interim (SFITX) - yield 3.80%, YTD return 6.50%, $250 minimum investment

Hartford Inflation Plus A (HIPAX) - yield 3.41%, YTD return 6.22%, $1,000 minimum investment

Schwab Inflation Protected Select (SWRSX) - yield 4.24%, YTD return 5.82%, $50,000 minimum investment

Exchange Traded Government Funds
Funds with portfolios holding U.S. government bonds or investment grade bonds, a portfolio average maturity duration less than 10 years, and 52-week returns which outperformed overall bond indexes.

iShares 1-3 Year Treasury Bond Fund (SHY) - yield 4.41%, holds U.S. Treasuries, average duration 1.8 years, 52-week return 5.70%

iShares Lehman 7-10 Year Treasury Bond Fund (IEF) - yield 4.60%, holds U.S. Treasuries, average duration 6.64 years, 52-week return 5.51%

iShares Lehman Intermediate Credit Bond Fund (CIU) - yield 5.41%, holds government agency and investment grade bond, average duration 5.15 years, 52-week return 4.61%

More information regarding iShares exchange traded funds here

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