Would you invest bond mutual funds holding GNMA now? Like this one: USGNX. Does the govt bailout make it good?

Question

Would you invest bond mutual funds holding GNMA now? Like this one: USGNX. Does the govt bailout make it good?

Answer 1

I don't think GNMA will fail. However, the real issue is the direction of interest rates.

If interest rates rise, bond principle will go down.

Of course, interest rates prob won't rise with the next Fed meeting next week. But at some pt, rates will rise.

Question is: to what extent will the loss of principle be countered by your income.