For years they've been dissed by stock market snobs who found their widow-and-orphan-sized returns laughable. And during the past few weeks they've been battered by worries about everything from soaring oil prices to the sagging euro. But a look at the numbers shows some dramatic comparisons.

Bonds have been, to use a technical term, kicking you-know-what this year. And despite the recent display of dot-com

volatility, many experts expect the run to continue.

Take a look:

In a flat-to-down year for stocks, it's the bond investors who've got bragging rights. You



But can investors overlook the recent spate of crises that have helped push 30-year bond yields to nearly 6%, up from 5.66% in early September? Long-term

treasuries, in particular, the star of the fixed-income market's stealth rally this year, suddenly have a lot to overcome:

  • Oil prices are at post-Gulf War highs, making it harder to keep a lid on inflation.
  • Traders are swapping long-term debt for shorter-term issues in anticipation that after six rate hikes in the past 15 months, the Fed is ready to move in the other direction.
  • Treasuries are facing stiff competition from gigantic new issues of corporate debt, such as the recent $6 billion offering from Spanish telecom giant Telefonica (TEF) - Get Report.
  • Investors have become skeptical that either presidential candidate will actually use the budget surplus to retire Uncle Sam's debt, keeping bond supplies short and prices high.

Add it all up and what you've got is a classic buying opportunity, the bulls maintain.



. So what if oil is the highest it has been in a decade? Core inflation -- excluding jumpy food and energy costs -- is a mere 0.4 percentage points above

35-year lows

recorded in January, says Jim Paulsen, the resident bond bull and inflation skeptic at

Wells Capital Management

in Minneapolis. Other commodity indexes, including the

Commodity Research Bureau spot commodity

index and the

Goldman Sachs

nonenergy commodity price

index, are below the lows reached during the Asian economic collapse two years ago, he adds.

We're not headed into inflationary oblivion. Instead, we're headed for a replay of 1995, Paulsen thinks. That's when bond returns matched those of stocks as the economy slowed and interest rates eased following a string of Fed hikes induced by the last significant inflation scare. That year, 30-year bonds returned 31% and the

Dow Jones Industrial Average gained 34%. Stock market leaders that year were remarkably bondlike; the


financials gained 49%.

Before you start salivating, let me point out that Paulsen is looking for considerably more modest gains -- something in the teens for both stocks and bonds over the next year, while yields on Treasury bonds fall to 5% to 5.25%.

But you don't have to share Paulsen's outlook on interest rates to be bullish on bonds. And you don't have to place your bets on bipolar Treasuries either.


fixed-income chief Ian MacKinnon thinks interest rates are headed


-- to 6.25% or 6.5% on the 30-year bond, as the economy proves stronger than many expect. Nonetheless, fixed-income investments outside the volatile Treasury area range from "excellent values" to "screaming buys," according to MacKinnon. Corporate bond yields are so much higher than Treasuries right now, investors appear to be assuming a cumulative default rate of almost 20%, he figures -- one out of every five corporate bonds. To put that in context, consider that during the Great Depression default rates maxed out at about 20%.

TST Recommends

"When you can get 7% to 8% in a high-quality corporate, that's good value against any asset class," says MacKinnon. Ditto for agency and mortgage-backed bonds, says MacKinnon.

Below, a bond sampler of some top-performing funds outside the Treasury market:

Why, you might ask yourself when you look at that table, has money been pouring out of bond funds all year? According to the

Investment Company Institute

, bond funds saw $40 billion in net withdrawals through July.


estimates that another $4.3 billion drained out in August. Meanwhile, some $232 billion has gone into stock funds during this year through July, outpacing last year's $103 billion in the same period.

How can investors be so myopic? Simple, says Vanguard's MacKinnon. Not many were around during the 1970s, when stocks were the dogs of the market and bonds were the sexy holdings. During that decade the S&P 500 returned an average 5.8% a year -- behind the 6.4% return for T-bills, the 6.1% for corporate bonds and the 7.4% average annual inflation rate.

Look, you don't have to make like

John Travolta

and disco the night away. But would it kill ya to buy a bond or two?

Investors who simply can't overcome their stock addiction might substitute the "bonds of the stock market," says Paulsen. They include stocks that can continue to grow even when the economy doesn't, including health care issues (


(MRK) - Get Report


Eli Lilly

(LLY) - Get Report

) and consumer staples (


(WMT) - Get Report



(MCD) - Get Report

). Paulsen also likes rate-sensitive financials, as long as they're outside the banking sector, where credit quality worries might surface in a slowing economy. Better: Insurer

American International Group

(AIG) - Get Report

and mortgage-giant

Fannie Mae

. As for utilities, Paulsen prefers plain vanilla, "the


(ED) - Get Report

of the world."

Anne Kates Smith is a senior editor at U.S. News & World Report in Washington. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds.