What Is a United States Treasury Money Mutual Fund?
Let me explain what a United States Treasury money mutual fund is—it's a mutual fund that pools money from investors like you to purchase low-risk government securities. Essentially, it's a type of mutual fund that invests primarily or exclusively in U.S. government debt, such as Treasury bills and repurchase agreements. If you're an investor seeking to preserve your principal or park cash temporarily, these funds are a leading choice.
Key Takeaways
A U.S. Treasury money mutual fund invests in low-risk and highly liquid assets such as U.S. Treasury bills. These funds suit investors who want stable options that protect their invested principal. Remember, money mutual funds are regulated by the Securities and Exchange Commission (SEC), which sets rules on maturity, credit quality, and liquidity of the securities involved.
Understanding a United States Treasury Money Mutual Fund
You should know that U.S. Treasury money mutual funds are among the industry's top low-risk investments. They typically put money into U.S. Treasury bills, making them highly stable and liquid. These funds are often classified as money market funds or placed in low-risk fixed income categories. Treasury bills are backed by the full faith and credit of the United States Treasury, which ensures reliability due to the country's developed economy and political stability.
U.S. Government Money Market Funds
Money managers offer money market mutual funds that invest fully in U.S. Treasuries. These U.S. government money market mutual funds use standard accounting to keep their net asset value at $1 per share based on amortized cost, not market value. They register as money market funds and follow Rule 2a-7 of the Investment Company Act of 1940.
This rule dictates the quality of investments, ensuring only the highest-rated debt is included. It covers maturity, credit quality, and liquidity: the average dollar-weighted maturity can't exceed 60 days. For liquidity, 10% of assets must convert to cash within one day, 30% within five days, and no more than 5% in securities that take over a week to liquidate.
Since the 2008 financial crisis—when the Reserve Primary Fund broke the buck by dropping below $1 NAV—rules for money market funds have been tightened for greater investor security. Often, brokerage providers offer these as cash sweep options or no-transaction-fee funds.
Some of the Most Popular U.S. Government Money Market Funds
- Vanguard Treasury Money Market Fund (VUSXX)
- Fidelity Treasury Only Money Market Fund (FDLXX)
- American Century Capital Preservation Fund (CPFXX)
U.S. Government Mutual Funds
Investment managers also provide U.S. government mutual funds that aren't labeled as money market but deliver similar benefits. These can yield slightly higher returns than money market funds with generally the same risk level. They come in short-, intermediate-, and long-term durations, where longer terms might offer better returns.
Some of the Most Popular U.S. Government Mutual Funds
- Eaton Vance Short Duration Government Income Fund (EALDX)
- Commerce Short Term Government Fund (CFSTX)
- Federated Hermes Total Return Government Bond Fund (FTRGX)
- Fidelity Intermediate Treasury Bond Index Fund (FUAMX)
- Vanguard Extended Duration Treasury Index Fund (VEDTX)
- Fidelity Long-Term Treasury Bond Index Fund (FNBGX)
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