Bond Traps The following fixed-income investments look enticing at a time when the 30-year Treasury bond is below 6%. But their two-to four-point yield advantage could lead you to trouble. COLLATERALIZED MORTGAGE OBLIGATIONS These derivatives backed by pools of AAA-rated, government-insured mortgages stick you if interest rates go either way. JUNK BONDS You may forfeit those high yields they're paying now if the economy slows considerably and default rates for the corporate issuers rise. EMERGING MARKET DEBT Your seemingly safe bond funds may be taking a big hit if they invested heavily in Asian economies to pump up returns. Return to main story

Updated Feb. 12, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.
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