Bond Funds Soared Up to 34% in November

Investors desperate to find safe investments caught a "Hail Mary" pass with long bonds in November. All 10 of the best-performing fixed-income funds from Oct. 31 to Nov. 28 benefited from heavy exposure to the long end of the yield curve.

During November, prices soared and yields dropped. Now at record lows, generic U.S. government bond yields sank to sub-1960 levels. Yields of 2.69% on the 10-year bond and 3.21% on the 30-year bond represent respective declines of 126 and 115 basis points from the close on Oct. 31.

The fed funds target rate, at 1% since Oct. 29, had been held at this level for a full year starting in June 2003 to fight off the last slump. Rock-bottom yields of 0.02% on one-month Treasury bills and 0.05% on three-month T-bills signal that the Federal Reserve is tapped out when it comes to lowering short-term interest rates to stimulate the economy.

To inject more liquidity into the banking system, the Fed may be forced to buy not just short-term Treasuries, but also long-term U.S. government debt, an action Fed Chairman Ben Bernanke suggested may be necessary. Fed purchases of mortgage debt are also expected to increase demand for long-term bonds and the funds that hold these securities.

The best-performing fixed-income funds in November were the SEI Institutional Investment Trust - Extended Duration Fund(EDRAX Quote), up 34.44%; PIMCO Extended Duration Fund(PEDIX Quote), up 24.59%; Vanguard Extended Duration Treasury Index Fund(VEDIX Quote), up 22.34%; American Century Target Maturities Trust Series 2025 Fund(BTTRX Quote), up 20.95%; and Rydex Series Funds - Government Long Bond 1.2x Strategy Fund(RYGBX Quote), up 20.87%.

Best-Performing Bond Funds in November
Fund (Ticker) Rating	Objective	Total Return November
SEI Institutional Investment Trust - Extended Duration Fund (EDRAX) U	Government/Corporate	34.44%
PIMCO Extended Duration Fund (PEDIX) U	Government/Corporate	24.59%
Vanguard Extended Duration Treasury Index Fund (VEDIX) U	Government/Agency	22.34%
American Century Target Maturities Trust Series 2025 Fund (BTTRX) C-	Govt/Agency-Target Term	20.95%
Rydex Series Funds - Government Long Bond 1.2x Strategy Fund (RYGBX) C+	Government/Agency	20.87%
Profunds US Government Plus ProFund (GVPIX) C+	Government/Agency	20.45%
Wasatch-Hoisington US Treasury Fund (WHOSX) C+	Government/Agency	17.11%
American Century Target Maturities Trust Series 2020 (BTTTX) C-	Govt/Agency-Target Term	14.27%
Dreyfus US Treasury Long Term Fund (DRGBX) C+	Govt/Agency-Long Term	12.13%
T Rowe Price US Treasury Long-Term Fund (PRULX) C+	Govt/Agency-Long Term	11.94%
Source: TheStreet.com Ratings & Bloomberg

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