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Mutual Fund Commentary

For investors looking at parking their funds with bonds, U.S. government securities are probably the safest possible investments in the category. Default risk is almost non-existent in this case, thought the trade-off is that the yields on such instruments are consequentially lower, a price for the quality of the investments. Moreover, interest payments on many treasury securities are exempt from local and state taxes. Consequentially, mutual funds holding government securities are the safest bond funds and a natural choice for the risk averse.

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.  To view the Zacks Rank and past performance of all government bond funds, investors can click here to see the complete list of funds.

T. Rowe Price US Treasury Long-Term (PRULX - MF report) invests at least 85% of its assets in U.S Treasury securities. The balances of its funds are used to purchase other securities backed by the credit of the U.S. government. The government bond mutual fund returned 31.43% over the last one year period.

The government bond mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.55% compared to a category average of 0.84%. 

Dreyfus US Treasury Long-Term (DRGBX - MF report) seeks current income and capital growth. The fund invests a substantially high proportion of its assets in securities issued or guaranteed by the U.S. government or its agencies. The government bond mutual fund returned 31.97% over the last one year period.

As of January 2012, this government bond mutual fund held 25 issues, with 16.09% of its total assets invested in US Treasury Bond 4.375%.

Fidelity Spartan Long-Term Treasury Bond Index (FLBIX - MF report) invests at least 80% of its assets in securities which are part of the Barclays Capital U.S. Long Treasury Bond index. The dollar-weighted average maturity period of the portfolio is at least 10 years or more. The government bond mutual fund returned 29.48% over the last one year period.

The Fund Manager is Curt Hollingsworth and he has managed this government bond fund since 2009.

Rydex Government Long Bond 1.2x Strategy (RYGBX - MF report) seeks returns which are 120% of the price movement of U.S. long Treasury bonds. The majority of the funds assets are utilized to purchase U.S. government securities and derivatives. The government bond mutual fund returned 48.28% over the last one year period.

The government bond mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.98% compared to a category average of 0.84%.  

Vanguard Long-Term Treasury Investor (VUSTX - MF report) utilizes a large share of its assets to purchase securities issued by the U.S. Treasury, including bills, bond and notes. The fund aims at maintaining a weighted average maturity period of 15 to 30 years, The government bond mutual fund returned 32.55% over the last one year period.

The Fund Manager is David R. Glocke and he has managed this government bond fund since 2001.

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.

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

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