Fund strategies of all types in the taxable-fixed income arena posted positive gains for the first quarter in 2010 and were led by the riskiest types, according to Lipper.

General U.S. Treasury funds declined 1.58 percent for March and finished the quarter up just 0.52 percent, Lipper research shows. The group leader was emerging-markets debt, with a 4.67 percent return for the first quarter of 2010.

High current-yield funds ticked up 2.99 percent in March and posted a 4.25 percent quarterly return. And muni-debt funds were lower in March and finished the quarter with a return of 1.27 percent.

“Bond investors should take heart that we’re far from out of the woods,” said Jeff Tjornehoj, Lipper’s research manager for the United States and Canada in Denver, in his March 31 analysis.

Treasury Funds

In the fixed-income field, Treasury funds were the worst performers for the quarter. The Barclays Capital U.S. 20-Plus-Year Treasury Bond Index moved up just 0.16 percent for the quarter, after falling nearly 2.5 percent for March.

The quarterly return for General U.S. Treasury Funds had a 52-basis-point gain, though the average GUT fund lost 1.58 percent. Long-term notes took a real beating, Tjornehoj says, but 10-year yields found support at the 4.00 percent level as the quarter came to a close.

As Tjornehoj points out, Pimco manager Paul McCulley expects the 10-year note will probably trade in the 3.50 percent-4.25 percent range during this recovery. And a recent Thomson Reuters poll shows dealer banks expect yields to touch 4.35 percent by year-end.

Corporate bond funds did quite well in the first three months of 2010, Lipper says. High current-yield funds improved 4.25 percent and loan-participation funds 3.91 percent. During the period, corporate debt BBB-rated funds gained 3.26 percent, while A-rated funds earned an average of 2.41 percent.

The world-income funds group was led by emerging-markets debt funds, up 4.67 percent, as investors sensed the faint glimmers of recovery would portend much brighter days ahead for risky assets. More risk-averse investors, though, got only 20 basis points of performance for the quarter in their international-income funds.

Municipal-debt funds followed Treasuries to move lower in March, says Tjornehoj, and declined an average of 14 basis points.

High-yield muni-debt funds topped the charts with a quarterly return of 2.87 percent, Lipper research shows, and California’s funds advanced 1.72 percent.