Hopeful on High-Yield Bonds

High-yield bonds are looking like a high-wire act for 2005.

Funds specializing in so-called junk bonds, or noninvestment-grade corporate debt, saw their second straight year of outsize returns in 2004. Investors in these funds can thank a recovering economy and an accommodative Fed.

Two straight years of strong returns, along with widespread predictions that interest rates will rise, are making some junk bond holders anxious. And Pimco manager Bill Gross' claim that cash is looking better than bonds of all stripes for 2005 isn't helping to soothe any rattled nerves either. ...