TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

As predictions grow that the economy has bottomed out, it may not be too early to move some money into inflation-indexed bond mutual funds.

Despite the assurances of Treasury Secretary Timothy Geitner, trillions of dollars -- from new bonds to stimulus money -- flowing into the economy has some investors predicting a return to rampant inflation.

TheStreet.com Ratings

TheStreet.com Ratings' model recommends holding three mutual funds hoarding inflation-indexed bonds that ranked in the 25 best-performing fixed-income funds in March. Two other fixed-income funds that invest in zero-coupon U.S. Treasury securities and one global bond fund also scored well.

The three fixed-income funds that invest in portfolios of Treasury Inflation-Protected Securities, or TIPS, are the Harbor Real Return Fund ( HARRX), up 6.6% in March; the American Independence US Inflation-Indexed Portfolio ( FFIHX), up 6.4%; and the Vanguard Inflation-Protected Securities Fund ( VIPSX), up 6%.

The two zero-coupon bond funds are both American Century funds. The American Century Target Maturities Trust Series 2020 ( BTTTX) rose 6.3%, while the American Century Target Maturities Trust Series 2025 Fund ( BTTRX) gained 6.1%. Both funds earned a rating of "C," or "hold," by our fixed-income fund model.

The other noteworthy fund, Templeton Global Bond Fund/United States ( TPINX) predominantly invests in the government debt of countries around the world, including Indonesia, at 12.1%, South Korea, at 11.8%, Mexico, at 10.8%, and the rest in Russia and the U.S.

Best-Performing Fixed-Income Mutual Funds in March
Fund (Ticker) Overall Rating Reward Grade Risk Grade Objective Total Return 1 Month Total Return 1 Year
PIMCO EM Fundamental IndexPLUS TR Strategy Fund (PEFIX) U U U Index Fund-Debt 19.40% NA
PIMCO Real Return Asset Fund (PRAIX) D- D E+ Govt/Agency-Intermediate Term 9.27% -6.86%
SEI Institutional Investment Trust - Extended Duration Fund (EDRAX) U U U Government/Corporate 8.67% 20.06%
Fixed Income SHares - Series R (FXIRX) U U U Government/Corporate 8.49% -7.86%
PIMCO Extended Duration Fund (PEDIX) U U U Government/Corporate 8.36% 23.61%
GAMCO Westwood Income Fund (WESRX) U U U Government/Corporate 7.92% -35.31%
Templeton International Bond Fund (TBOAX) U U U Government/Corporate 7.11% NA
PL Inflation Managed Fund (PPAIX) D D E+ Government/Corporate 6.83% -3.85%
John Hancock Funds II - Real Return Bond Fund (JHRRX) D+ C- D Government/Agency-not Maturity dependent 6.73% -5.08%
Western Asset Inflation Indexed Plus Bond Portfolio (WAIIX) D+ C- D Government/Corporate 6.65% -5.45%
Harbor Real Return Fund (HARRX) C- C D Government/Agency-not Maturity dependent 6.55% -2.64%
DFA Inflation Protected Securities Portfolio (DIPSX) U U U Govt/Agency-Intermediate/Long 6.43% -2.51%
Transamerica PIMCO Real Return TIPS (IRRAX) D C- D Government/Corporate 6.42% -3.99%
American Independence US Inflation-Indexed Portfolio (FFIHX) C- C D+ Govt/Agency-Intermediate/Long 6.39% -1.45%
BlackRock Bond Allocation Target M Shares Portfolio (BRAMX) U U U Government/Agency-not Maturity dependent 6.39% -6.10%
PIMCO Emerging Local Bond Fund (PELBX) U U U Emerging Market-Debt 6.34% -16.42%
American Century Target Maturities Trust Series 2020 (BTTTX) C A E Govt/Agency-Target Term 6.30% 15.60%
Templeton Global Bond Fund/United States (TPINX) C B- D+ Global Debt 6.27% -0.35%
Federated Real Return Bond Fund (RRFAX) U U U Government/Agency-not Maturity dependent 6.21% -1.83%
ING Emerging Markets Fixed Income Fund (IMIAX) E- E E- Emerging Market-Debt 6.20% -23.98%
Hartford Inflation Plus Fund/The (HIPAX) D+ C- D+ Government/Agency-not Maturity dependent 6.16% -1.62%
PIMCO Real Return Fund (PRRIX) D+ C- D Government/Corporate 6.15% -5.94%
Loomis Sayles Inflation Protected Securities Fund (LSGSX) D+ C- D Government/Agency-not Maturity dependent 6.12% -4.77%
American Century Target Maturities Trust Series 2025 Fund (BTTRX) C B+ E- Govt/Agency-Target Term 6.05% 15.51%
Vanguard Inflation-Protected Securities Fund (VIPSX) C- C D Govt/Agency-Intermediate/Long 5.99% -2.90%
Source: Bloomberg & TheStreet.com Ratings

The grades can be interpreted as follows: A is "excellent" and considered a "buy" recommendation. B is "good" or "buy." C is "fair" or "hold." D is "weak" or "sell." And E is "very weak" or "sell." A plus or minus sign designates that a fund is in the top or bottom third of funds with the same letter grade.

TheStreet.com Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research, click here now!
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.