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The Increasingly Competitive Intermediate-Government Morningstar Category

Some things stay the same only by changing.

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At the end of 2019, no funds in the intermediate-government Morningstar Category received a Morningstar Analyst Rating of Gold. By contrast, there were three Gold-rated funds five years ago: Fidelity Advisor Government Income (FVIIX), Pimco GNMA and Government Securities (PDMIX), and Vanguard GNMA (VFIJX). Although the introduction of our new ratings methodology has something to do with that, it doesn't signal a deterioration in the resources of those top-shelf funds, as overall trends in the category have been evolving for several years. It does, however, reflect an increasingly competitive investment field, against the backdrop of a market with much less to offer than it used to.

Contexts Evolve
For one thing, the universe of open-end intermediate-government fund options has shrunk. There were only 66 distinct open-end offerings at the end of 2019. That's a big change for a group that once dominated the bond-fund universe, and nearly that many were shuttered in just the past 10 years. By and large, the universe of survivors is a naturally more competitive group. At the same time, a number of exchange-traded fund options--such as iShares MBS ETF (MBB), iShares GNMA Bond ETF (GNMA), and Vanguard Mortgage-Backed Securities ETF (VMBS)--have come to market with lower pricing, further pressuring open-end rivals that have higher fee hurdles to clear.

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