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Mutual funds investing in debt securities are among the most secure investment options, which provide regular income while protecting the capital invested. Funds that are part of this category bring a great deal of stability to portfolios with a large proportion of equity, while providing dividends more frequently than individual bonds. U.S. government bond funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered the safest in the bond fund category and are ideal for risk-averse investors.

Meanwhile, a short-term government bond fund is a mutual fund that is limited by its investment objectives and fund bylaws to investing primarily in short-term obligations of the federal government or its agencies. Depending on the fund's definition, short term can be up to five years.

Below we share with you three top-rated short-term government bond mutual funds viz. Vanguard Short-Term Inflation-Protected Securities Index Fund (VTAPX - Free Report), PGIM Short Duration High Yield Income Fund- Class R6 (HYSQX - Free Report), and T. Rowe Price Institutional Floating Rate Fund Class F (PFFRX - Free Report). Each has earned a Zacks Mutual Fund #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Vanguard Short-Term Inflation-Protected Securities Index Fund invests the majority of its assets in the market-capitalization-weighted index which consists of inflation-protected public obligations issued by the U.S. Treasury with less than 5 years of maturity remaining. VTAPX management maintains its portfolio in approximately the same proportion as it is in the index.

Vanguard Short-Term Inflation-Protected Securities Index Fund has three-year annualized returns of 4.2%. As of the end of December 2021, VTAPX has invested most of its assets in various U.S Treasury Inflation Index Bonds.

PGIM Short Duration High Yield Income Fund- Class R6 seeks a high level of current income by investing maximum of its net assets in diversified high-yield fixed-income bonds that are below investment grade with varying maturities dates. HYSQX also invests in other asset classes with similar economic characteristics.

PGIM Short Duration High Yield Income Fund- Class R6 has three-year annualized returns of 3.6%. HYSQX has an expense ratio of 0.70% compared with the category average of 0.95%.

T. Rowe Price Institutional Floating Rate Fund Class F seeks high current income along with capital appreciation by investing most of its net assets along with borrowings, if an in floating-rate loans and floating-rate debt securities.PFFRX advisors can also invest a small portion of its assets in non-U.S. dollar-denominated loans and debt instruments issued in emerging markets

T. Rowe Price Institutional Floating Rate Fund Class F has three-year annualized returns of 3%. Paul M. Massaro has been the fund manager of PFFRX since May 2009.