LOS ANGELES ( TheStreet) -- Corporate and select mortgage-backed bonds will offer the best fixed-income returns as the economy struggles to get its footing, says Thomas Atteberry, manager of the FPA New Income Fund ( FPNIX).The $4.2 billion mutual fund is up 2.3% this year, leading 98% of its rivals. FPA New Income Fund has risen an annual average of 4.6% over three years and five years, but with erratic results. It topped 4% and 22% of its peers, respectively. The fund has returned 3.3% over the past year, according to Morningstar ( MORN). Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format. Is the economy going to double dip? Atteberry: Whether it's an actual double dip when you go back into a recession is immaterial as much as the economy is going to slow down. You're going to have a sort of subperiod of muddling through you continue to work through the debt problems that you have and deleveraging. Do you think the so-called bond vigilantes are going to strike? And if so, how soon? Atteberry: It's difficult to know when someone strikes. As we think about government debt, they never repay it, they just refinance it. And so as long as there's a trust that you can pay them, there really isn't much of a problem. But the minute that trust comes into question, that's when that "vigilante" sort of phrase comes to mind. It's hard to know when it is, other than the fact that I think that we are along the path where that's going to happen someday until we get control of the amount of debt the government's taking off. The Federal Reserve and Chairman Ben Bernanke have sounded less confident about the recovery of late. What are you hearing from the Fed? Atteberry: I'm hearing that they're struggling to handle deleveraging versus the traditional cyclical downturn of the economy where inflation and utilization got too high. Many of the tools they've used in the past aren't going to work as well. Bernanke did not seem to completely understand why people are not borrowing money, like it was a question of whether they had access to credit. Surveys say small businesses have access to credit, they're just not interested in borrowing money.
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