The trouble with Treasuries.Government bond fund managers navigate (1) "Surfing the Web." To move from page to page on the Web.(2) To move through the menu structure in a software application. bear market As is the case for realtors, the three most important rules for government bond portfolio managers are: structure, structure and structure. That was especially true in 1999, when bonds suffered one of the worst bear markets since 1994--the year when the Federal Reserve raised interest rates 300 basis points, or 3%. As recently as 1998, a number of economic crises prompted investors to pour money into U.S. Treasuries U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. , the bonds issued by the government to finance federal debt. But this year the situation has been nearly the opposite. Bonds have been rattled rat·tle 1 v. rat·tled, rat·tling, rat·tles v.intr. 1. a. To make or emit a quick succession of short percussive sounds. b. by the continuing strength of the economy, which has prompted three interest-rate hikes by the Fed. In turn, investors have sold Treasuries and other bonds, sending yields past 6% on 30-year Treasuries. This bearish Bearish Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value. bearish environment has hurt the performance of long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. government bond funds, which had a negative cumulative total return of 6.16% through November November: see month. 30, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. mutual fund researcher Morningstar. So those bond fund managers who anticipated rising rates and structured their portfolios accordingly achieved better returns than their peers, according to Sarah Bush, an analyst with Morningstar. Still, few funds had positive total returns. One exception was the $120 million Dreyfus Basic GNMA GNMA abbr. Government National Mortgage Association (Nasdaq: DIGFX) fund, in first place with a year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. cumulative total return of 3.05%, outstripping the average government bond fund. It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have almost an unfair comparison, given the structure of the portfolio. It invests primarily in Government National Mortgage Association, or Ginnie Mae Ginnie Mae: see Federal National Mortgage Association. , bonds, also called mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. . But according to the way Morningstar classifies government bond funds, it does fit in the category. "We were certainly in the camp that thought rates would be rising and that the flight to quality [to Treasuries] would subside sub·side intr.v. sub·sid·ed, sub·sid·ing, sub·sides 1. To sink to a lower or normal level. 2. To sink or settle down, as into a sofa. 3. To sink to the bottom, as a sediment. 4. " said Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. Hoeh, senior portfolio manager of the Dreyfus GNMA fund. Sector selection within GNMAs therefore played a major role in the performance of Hoeh's fund. The fund invests primarily in plain-vanilla plain-vanilla Of or relating to the uncomplicated version of a particular type of security. For example, a plain-vanilla derivative is typically exchange-traded and void of bells and whistles. GNMA bonds, and has to have, at minimum, 65% in Ginnie Maes. Last year, Hoeh increased the fund's exposure in GNMA ARMs (adjustable-rate mortgages Adjustable-rate mortgage (ARM) A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or ) to 15% from nearly zero. He invested in Ginnie Mae securities maturing in 15 years. Some fund managers who invested in Treasuries were able to beat their peers by mimicking the market instead of trying to beat it. "We're an index fund, so we don't try to do anything too clever," says David Lindsay David Lindsay may refer to:
Treasury Index (Nasdaq: IUTIX) fund. Lindsay says the key to his fund's success was buying Treasuries with the same average maturity, whereas managers who didn't do as well bought longer maturities. He invested in Treasuries maturing in from one to under 30 years and with coupons ranging from 4% to 12%.The fund mimics the Lehman Brothers Lehman Brothers Holdings Inc. (NYSE: LEH), founded in 1850, is a diversified, global financial services firm. It is a participant in investment banking, equity and fixed income sales, research and trading, investment management, private equity, and private banking. U.S. Treasury Index and the Salomon Brothers
Salomon Brothers was a Wall Street investment bank. U.S. Treasury Index. The structure played an important role in the performance of Lindsay's fund. He points out that since the Treasury market is made up mostly of bonds with intermediate maturities, about 51% of the Galaxy fund is in securities maturing in one to five years. Also, much of the portfolio is in "off-the-run" Treasuries, those that were issued years ago and consequently have higher coupons. Through the period ended November 30, the portfolio was able to achieve a negative cumulative total return of 2.26%, performing better than its peers. TOP 5 LONG-TERM GOVERNMENT BOND FUNDS
Yr.-to-Date
Fund Name (Ticker) Total Return(*)
Dreytus Basic GNMA 3.06%
(DIGFX)
PaineWebber Pace Gov't Sec. F/I 1.36
(PCGTX)
Galaxy II U.S. Treasury Index -2.26
(IUTIX)
Chase Vista U.S. Gov't Securities A -2.30
(HUSAX)
Pacific Capital U.S. Treasury Securities -3.36
(PCUTX)
Long-Term Gov't Bond Fund Averages -6.16
1-Year
Fund Name (Ticker) Total Return
Dreytus Basic GNMA 3.69%
(DIGFX)
PaineWebber Pace Gov't Sec. F/I 1.93
(PCGTX)
Galaxy II U.S. Treasury Index -1.96
(IUTIX)
Chase Vista U.S. Gov't Securities A -2.05
(HUSAX)
Pacific Capital U.S. Treasury Securities -3.26
(PCUTX)
Long-Term Gov't Bond Fund Averages -6.04
5-Year 12-month
Fund Name (Ticker) Total Return Yield
Dreytus Basic GNMA 7.77% 6.63%
(DIGFX)
PaineWebber Pace Gov't Sec. F/I N/A 5.81
(PCGTX)
Galaxy II U.S. Treasury Index 7.31 6.04
(IUTIX)
Chase Vista U.S. Gov't Securities A N/A 5.16
(HUSAX)
Pacific Capital U.S. Treasury Securities 7.32 5.60
(PCUTX)
Long-Term Gov't Bond Fund Averages 7.92 5.25
Toll-Free
Fund Name (Ticker) Numbers
Dreytus Basic GNMA 800-373-9387
(DIGFX)
PaineWebber Pace Gov't Sec. F/I 800-627-0660
(PCGTX)
Galaxy II U.S. Treasury Index 800-628-0414
(IUTIX)
Chase Vista U.S. Gov't Securities A 888-348-4782
(HUSAX)
Pacific Capital U.S. Treasury Securities 800-268-9232
(PCUTX)
Long-Term Gov't Bond Fund Averages
Minimum
Fund Name (Ticker) Initial Investment
Dreytus Basic GNMA 10,000
(DIGFX)
PaineWebber Pace Gov't Sec. F/I 10,000
(PCGTX)
Galaxy II U.S. Treasury Index 2,500
(IUTIX)
Chase Vista U.S. Gov't Securities A 2,500
(HUSAX)
Pacific Capital U.S. Treasury Securities 1,000
(PCUTX)
Long-Term Gov't Bond Fund Averages
(*) Ranked by cumulative total return as of 11/30/99 Source: Morningstar Inc. (www.morningstar.com) BOTTOM 5 LONG-TERM GOVERNMENT BOND FUNDS
Yr.-to-Date 1-Year
Total Return(*) Total Return
Amer. Century Target Maturity 2025 -17.71% 18.60%
(BTTRX)
Rydex U.S. Government Bond -16.96 -17.62
(RYGBX)
Amer. Century Target Maturity 2020 -16.46 -15.88
(stax)
Amer. Century Turget Maturity 2015 -12.68 -13.68
(BTFTX)
Wasatch-Hoisingtan U.S Treasury -10.52 -10.83
(WHOSX)
Long-Term Gov't Bond Fund Averages -6.16 -6.04
5-Year 12-month
Total Return Yield
Amer. Century Target Maturity 2025 N/A 5.19%
(BTTRX)
Rydex U.S. Government Bond 7.17% 5.18
(RYGBX)
Amer. Century Target Maturity 2020 14.77 6.97
(stax)
Amer. Century Turget Maturity 2015 12.69 5.14
(BTFTX)
Wasatch-Hoisingtan U.S Treasury 7.52 2.44
(WHOSX)
Long-Term Gov't Bond Fund Averages 7.92 5.25
Toll-Free
Numbers
Amer. Century Target Maturity 2025 800-345-2021
(BTTRX)
Rydex U.S. Government Bond 800-820-0888
(RYGBX)
Amer. Century Target Maturity 2020 800-345-2021
(stax)
Amer. Century Turget Maturity 2015 800-345-2021
(BTFTX)
Wasatch-Hoisingtan U.S Treasury 800-551-1700
(WHOSX)
Long-Term Gov't Bond Fund Averages
Minimum
Initial Investment
Amer. Century Target Maturity 2025 2,500
(BTTRX)
Rydex U.S. Government Bond 25,000
(RYGBX)
Amer. Century Target Maturity 2020 2,500
(stax)
Amer. Century Turget Maturity 2015 2,500
(BTFTX)
Wasatch-Hoisingtan U.S Treasury 2,000
(WHOSX)
Long-Term Gov't Bond Fund Averages
(*) Ranked by cumulative total return as of 11/30/99 Source: Morningster Inc. (www.morningstar.com) |
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