If you are trying to steer clear of mortgage backed securities and all those clever tranches of Moody’s “AAA” rated debt, then you may want to steer clear of Fidelity “Government Bond” funds.  Take a look at the current holdings of the Fidelity Government Income Fund (FGOVX).  Notice the circled “MBS Passthrough”, which according to the Fidelity representative I just talked to, refers specifically to those clever mortgage pools that were supposed to be as safe as government bonds.


If you are looking for a real government bond fund, safe from all the MBS garbage, then you may want to consider the iShares “Lehman short term treasury bond fund” (symbol SHV).  According to the iShares website, it has a low operating expense of only .15%.  It trades as an ETF, and it is nearly 100% invested in short term United States treasuries.  The listed 5 year annualized return on the shares is only 3.26%, so you probably won’t get rich buying it.  But then again, you probably won’t encur massive losses from all the other supposedly “AAA” rated “Government Bonds”.