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TheStreet.com Ratings has sorted through the roughly 5,000

bond funds

we rate and compiled a list of those that received the largest upgrades from us in the third quarter.

As would be expected, there was a clear flight to quality in the three months ended Sept. 30, with investors piling into short- to intermediate-term U.S. Treasuries.

The risk or volatility -- termed duration for bonds -- is lower at the short and intermediate end of the Treasury yield curve (i.e. those government bonds with roughly less than two years to maturity for short-term and two to five years for intermediate-term). Duration measures the interest rate sensitivity of the price of a bond to a 1% change interest rates. The shorter the term to maturity the lower the duration and less price sensitivity to any change in interest rates by the

Federal Reserve

.

However, in my view, duration can only be of relevance in a properly functioning market, and we do not have that right now. We have a fear-based market that has investors pulling out all stops to prevent capital destruction and they are doing this by running to U.S. government debt. It is a sign of the times that the funds that received the largest upgrades for the quarter returned pretty much 0% or slightly less for the three-month period.

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Sam Patel, CFA, is the manager of mutual fund research for the TheStreet.com Ratings.

In keeping with TSC's Investment Policy, employees of TheStreet.com Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

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