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. ...