Coupon Clippers Eye High-Yield Funds

Finally, investors might have resumed shopping for high-yield picks, but fund managers are cautioning them not to expect many bargains. They say most of last year's 20%-plus gains came from bond prices increasing relative to Treasuries, something that will not recur in 2004 as so-called yield spreads have substantially tightened. Instead, investors will have to be satisfied with the coupon alone, which would mean an average annual return in the 7% to 8% range if the current state of affairs continues.

"The environment is good for high-yield, but there is not a lot of total return left," says Thomas Huggins, co-portfolio manager for the (EVIBX)Eaton Vance Income Fund of Boston. "The high-yield market might look good comparatively because there is nothing else out there. But on the whole, this is a 'coupon clipper' type of year."

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