The Miracle of Treasury-Bond Funds

Not everything lost in 2008, but Treasuries' winning streak will end when the economy improves.

You'll find only lumps of coal in your stock funds this year-end. But some bond funds squeezed out diamonds in the rough market. Any positive return is worthy of praise.

With panicked investors buying Treasury bonds as if they were the last Wii systems in the store on Christmas Eve, funds that focused on U.S. government debt stood out among 2008's top performers. On average, medium-maturity government-bond funds gained 5% in 2008. The reason: A mania for absolute safety -- the Treasury won't default -- has driven yields to record lows. Ten-year Treasury notes recently paid a measly 2.08%. Short-term bills hit 0%.

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Stacy Rapacon
Online Editor,

Rapacon joined Kiplinger in October 2007 as a reporter with Kiplinger's Personal Finance magazine and became an online editor for in June 2010. She previously served as editor of the "Starting Out" column, focusing on personal finance advice for people in their twenties and thirties.

Before joining Kiplinger, Rapacon worked as a senior research associate at b2b publishing house Judy Diamond Associates. She holds a B.A. degree in English from the George Washington University.