Pockets of Opportunity Still Lurk in Bonds

Bonds survived a brutal financial upheaval, reinforcing my confidence that positive returns will extend through the remainder of this strange year, albeit with massive help from the Federal Reserve. There will be more bad days and shrill headlines, and you can expect a bulge in corporate debt downgrades to junk status in the most-depressed industries and localities. But actual defaults will remain low. And there will be no magical economic boom to send interest rates flying and slash bond returns.

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Consequently, your principal will be okay and income reliable. This is in sharp contrast to that hour-by-hour maelstrom of emotion called the stock market. With few exceptions, corporations, states, municipalities and public-service authorities have the cash flow and reserves to meet their interest obligations. The Fed is buying big-city bonds. The U.S. government pays Treasury debt and backstops gazillions of mortgages.

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