Bonds Are Back

Long-time subscribers to Forbes/Lehmann Income Securities Investor will recall our various moans and groans about the bond market and its lack of any reasonable returns when compared to similar products among the preferreds. Well, things have changed, and this time for the better.

In fact, yields reached their bottom in October when AAA yields were at 6.9% and BBB at 10.2%. These are the kinds of returns we were used to seeing in preferreds last year--and then for much lower quality issuers.

At the end of November, the returns for AAA stood at 5.96% and BBB at 9.99 but with one big difference. U.S. Treasuries have sunk to a yield of only 2.84%, a leap of faith for a 10-year instrument that faces a Federal Reserve Bank, which is still inflating its balance sheet from a recent $800 billion to now $3 trillion and counting.

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It takes a really scared investor to think he is safer lending the Treasury money at 2.84% versus, say, General Electric (nyse: GE - news - people ) at 7%. Are investors so focused on a complete financial meltdown that they choose to ignore the greater threat of inflation over a 10-year period. Oh sure, you say, they can always sell the 10-year Treasuries when the crisis passes, but then who do you think will buy them at this yield? Certainly not Mr. Market.

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In any case, this month's Forbes/Lehmann Income Securities Investor features the first of, we hope, many more months in which we can recommend a complete complement of bonds. Well, not exactly complete in the sense that we are still reticent to recommend single B and CCC-rated issues despite their mouth-watering yields.

Secure your retirement with income from bonds, preferreds and convertibles. Click here to learn how with Forbes Lehmann Income Securities Investor.