Junk Bonds Return Highest Gain Since '91

With the help of the $92 million raked in during the last week of the year, the ninth straight week of inflows to funds investing in bonds below investment grade, bond funds enjoyed their second strongest performance on record, according to a Reuters report.

Overall, counting price gains and interest, these investments returned 28% in 2003, the biggest gain since a record 39% in 1991.   By comparison, investment-grade corporate bonds returned 8% and US Treasuries 2%.

Much of the inflow can be attributed to an economic turnaround equaling lowered default risks on these investments that lack investment-grade ratings but pay high yields to compensate for their risks.   Additionally, investors turned their attention to these bonds in hopes of finding higher returns as yields on safer bonds remained unappealingly low.