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These Bond Funds Should Benefit From a Flight to Quality

JPMorgan Government Bond and American Funds US Government Securities have important differences, but both could work well as a safe haven.

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Emory Zink: The intermediate-government bond category may appear straightforward, but its constituents offer subtly differentiated portfolios. For example, both Silver-rated JPMorgan Government Bond and Bronze-rated American Funds US Government Securities are funds with Positive Process Pillar ratings. While the investment menu for either is similar, and includes U.S. Treasuries, agency mortgages, and more modest allocations to out-of-benchmark fare, such as TIPS and CMBS, the funds' profiles can differ considerably.

For example, JPMorgan Government Bond selects collateralized mortgage obligations, or CMOs, which the team prefers for their stable and predictable cash flow characteristics. As of September 2018, the allocation to agency CMOs was 35% for JPMorgan Government Securities but only 3% for American Funds US Government Securities, which prefers more traditional agency mortgage pass-throughs. 

Emory Zink does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.