Risky Funds Dominate

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.