Bond funds come in all shapes and sizes, and the old adage that “bonds are for safety” doesn’t always hold up. The fixed income market is broad and diverse, and the variation across fund strategies makes it easy to be misled by that generalization.
Some bond funds do focus on capital preservation, such as ultra-short-term strategies that invest in high-quality securities like Treasury bills and commercial paper. These are ideal for short-term savers seeking liquidity and minimal volatility, with the possibility of modest income.
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On the other hand, many bond funds pursue a “total return” mandate — a strategy that seeks not only income, but also capital appreciation. These funds are often actively managed and may take bold positions to capitalize on macroeconomic trends, like falling interest rates or tightening credit spreads, making them more sensitive to risk.
So, if your primary goal is income generation, it’s important to look under the hood. The best bond funds for steady income will ideally have a track record of consistent monthly distributions and a 30-day SEC yield higher than the prevailing short-term interest rate set by the Federal Open Market Committee (FOMC) — which, following its recent meeting, currently sits between 4.25% to 4.5%.
Here are seven of the best Fidelity bond funds to buy for steady income:
| Fund | Expense ratio | 30-day SEC yield |
| Fidelity High Income Fund (ticker: SPHIX) | 0.88% | 7.1% |
| Fidelity Total Bond Fund (FTBFX) | 0.44% | 4.9% |
| Fidelity Corporate Bond Fund (FCBFX) | 0.45% | 5.0% |
| Fidelity Long-Term Treasury Bond Index Fund (FNBGX) | 0.03% | 4.7% |
| Fidelity Floating Rate High Income Fund (FFRHX) | 0.73% | 7.8% |
| Fidelity Short Duration High Income Fund (FSAHX) | 0.71% | 6.4% |
| Fidelity New Markets Income Fund (FNMIX) | 0.76% | 6.5% |
Fidelity High Income Fund (SPHIX)
“The fixed-income markets are one of the few markets that are non-exchange-traded, and thus having experience and relationships can create an advantage,” says Jeffrey Kalapos, chief investment officer at Coastal Bridge Advisors. “Therefore, understanding the management team’s investment philosophy, process and past experience is paramount.” This is especially important for active bond funds like SPHIX.
SPHIX doesn’t passively replicate a benchmark index. Instead, a team of three portfolio managers actively select bonds with the goal of generating higher-than-average income. The fund currently delivers a high 7.1% 30-day SEC yield, but this comes at the cost of lower credit quality. SPHIX’s holdings include preferred stocks and convertible securities, with a focus on distressed bonds in particular.
Fidelity Total Bond Fund (FTBFX)
“Generally speaking, higher income comes at greater credit risk because investors need to be compensated for the additional credit-risk premium over comparable Treasury bonds, which are risk-free in terms of default,” says Mark Andraos, partner at Regency Wealth Management. For income investors, this trade-off may be acceptable in order to earn a yield higher than the current risk-free rate.
FTBFX is a fairly beginner-friendly Fidelity bond fund designed to potentially outperform the Bloomberg U.S. Aggregate Bond Index. It is diversified, with over 6,900 holdings, mostly owning domestic investment-grade bonds, but it can also allocate to high-yield and emerging-market bonds. The fund can employ leverage via derivatives such as swaps, options and futures. FTBFX pays a 4.9% 30-day SEC yield.
Fidelity Corporate Bond Fund (FCBFX)
As Andraos noted, bond investors can generally earn higher yields by owning corporate bonds over government Treasurys. Fidelity’s bond fund for this segment is FCBFX. The majority of this fund is allocated to “A”- and “BBB”-rated investment-grade corporate bonds. However, it can opportunistically target non-investment-grade bonds as the portfolio manager deems fit to pursue higher yields.
FCBFX’s 5% 30-day SEC yield isn’t the highest, but it’s greater than what the average aggregate bond fund or money market fund pays. Its 0.45% expense ratio is also fairly reasonable for an actively managed bond fund, and there’s no minimum required investment. However, corporate bonds tend to be less tax efficient than Treasurys, which can be a problem for high-income-bracket investors.
Fidelity Long-Term Treasury Bond Index Fund (FNBGX)
Another way to boost yield is by increasing bond maturity, since longer-dated bonds typically pay more interest to compensate investors for the added duration risk and opportunity cost of locking up their money for an extended period. This can boost income potential without compromising credit quality. However, the trade-off is greater interest rate sensitivity. Fidelity’s bond fund for this role is FNBGX.
FNBGX is benchmarked against the Bloomberg U.S. Long Treasury Index and maintains a dollar-weighted average maturity of 10 years or more. During years like 2022 when interest rates rise quickly, FNBGX can see steep losses — that year, it ended up 29.4% down. However, if rates fall during a recession, the opposite could happen. The fund currently pays a 4.7% 30-day SEC yield and charges a low 0.03% expense ratio.
Fidelity Floating Rate High Income Fund (FFRHX)
“Understanding the fund’s true purpose and guideline constraints are often overlooked in the diligence process,” Kalapos says. “More strict guidelines can be both positive or negative, depending on the type of exposure you are trying to seek for — one potential effect is that it may negatively limit the portfolio management’s investment options.” This dynamic can be seen in play with FFRHX.
This fund is required to invest at least 80% of its portfolio in floating-rate loans, which pay a coupon variable based on a benchmark like the secured overnight financing rate. Many of these bonds tend to be non-investment-grade, which increases the risk of default. However, the floating-rate feature makes them resistant to rising rates and currently produces a high 7.8% 30-day SEC yield.
Fidelity Short Duration High Income Fund (FSAHX)
Another way bond investors can guard against the risk of rising interest rates is via short-duration funds like FSAHX. This fund normally maintains an average duration of three years or less, giving it relatively low interest rate sensitivity. It also has the ability to hold floating-rate loans and will largely invest in high-yield bonds rated “BB” or “B,” which come with higher risks but pay greater yields.
FSAHX held up fairly well during 2022’s rising-rate, high-inflation bear market. While the Morningstar high-yield bond peer category fell by an average of 10.1%, FSAHX fell just 6.1%. However, this ETF does charge a relatively high 0.71% expense ratio and isn’t very tax efficient. If you want to keep the 6.4% 30-day SEC yield in its entirety, consider holding FSAHX in a tax-sheltered account like a Roth IRA.
Fidelity New Markets Income Fund (FNMIX)
Bonds from foreign, developing countries tend to offer higher yields than U.S. bonds of a comparable maturity. This is because investors demand extra compensation for taking on greater default risk and political uncertainty, as these nations generally have lower credit ratings and less stable financial systems. Investors can access these emerging-market bonds via FNMIX.
FNMIX’s portfolio consists largely of sovereign bonds issued by foreign governments. The main countries represented include Mexico, the United Arab Emirates, Brazil, Saudi Arabia, Venezuela, Colombia and Turkey. There is a large allocation to non-investment-grade bonds ranging from “CCC” and below to “BB.” However, investors are compensated for this risk with a relatively high 6.5% 30-day SEC yield.
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7 of the Best Fidelity Bond Funds to Buy for Steady Income originally appeared on usnews.com
Update 03/28/25: This story was previously published at an earlier date and has been updated with new information.
