Over the last three years GNMA bonds have paid investors an average of 150 basis points over treasuries. That’s a terrific excess return for full faith and credit securities. In a market full of junk, it’s comforting to have the risk reduction characteristics of full faith and credit securities. And the volatility, compared to treasuries, has been more predictable. Hang with your Vanguard GNMA and if you have a five year window add to it. But don’t treat it like an alternative to cash because it’s not. It’s an investment.
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