If you want a feel for the collective mood on Wall Street, look no further than Miriam Greenberg.
"Wall Street loves bonds," she says, and so does she.
Ms. Greenberg is president of MRG Associates Ltd., an executive recruiting firm in New York, and part of her job is to detect investment trends ahead of the market so she'll be ready when investment firms need job candidates.
Early this year, she kept hearing from her investment banking clients that the bond market is hot.
"Economic turmoil in Asia, Russia, and Latin America and wild swings in stocks have inspired investors to flock to fixed income [bonds]," says Greenberg.
Billions into bonds
Investors want safety, and they're looking for it in bonds and bond funds.
The Investment Company Institute says investors pumped some $52 billion into bond funds in1998, through August, sheltering a record $794 billion, compared with $2.4 trillion in stock funds.
Greenberg herself joined the stampede to safety - taking 15 percent of her money out of stocks in favor of bond funds.
But investors don't want just any bonds. Only the safest will do, and that means US Treasury securities.
In recent weeks, investors spooked by international crises have gobbled up Treasuries so eagerly, that bond yields (interest rates), which move in the opposite direction of bond prices, hit 30-year lows - 4.96 percent on Wednesday.
"There has definitely been a flight to quality," says Alan Levenson, chief economist at T. Rowe Price. "Investors want to go all the way to the ultimate quality of US Treasury securities. Nothing in between seems safe enough."
Bonds that lack that perception of security have been big losers.
In August, investors in emerging-market bonds lost 28.7 percent of their money; convertible bonds lost 11.8 percent; high-yield (junk) bonds lost 7.4 percent of their value.
Only two non-Treasury bond sectors showed gains for the period: municipal bonds rose 1.92 percent and the highest-rated corporate bonds inched up 0.51 percent. Treasury bonds, meanwhile, advanced 2.16 percent.
Federal Reserve Chairman Alan Greenspan, who recently disclosed that he personally owned $2.4 million in short-term Treasury bills last year, must be feeling exuberant!
Interest rates are the major mover of bond prices. When rates decline, bond prices rise and vice versa.
For much of this year, interest rates have moved lower, as inflation fears deflate, bringing big jumps in bond prices.
The Lehman Brothers Long-Term Treasury Bond Index is up about 13 percent this year, through Sept. 28, compared with an 8 percent gain for the Standard & Poor's 500 stock index.
Why bonds look better
Stocks, historically, ring up better returns than bonds, but there are periods when bonds become stronger. And during an economic slowdown, such as the one emerging in the US, is one of those times.
When the economy slows, stock prices either fall or stagnate, and interest rates generally slip, giving a boost to bonds.
Financial advisers say that for investors who want to escape stock volatility and who will need their money in five years or less, low-risk bonds look especially attractive.
Among the choices:
* Bond mutual funds. They offer ease of purchase, a modest minimum investment, low fees, and diversification through the large number of different bond issues owned by the funds.
"If you're extremely risk averse and want some intermediate or short-term safety, this makes a lot of sense," says Phil Schettewi, managing partner of Loomis, Sayles & Co.
* Individual bonds. You can buy these through a brokerage firm or directly from the US Treasury (www.publicdebt.treas.gov or via touch-tone phone in late October: 800-943-6834). Whole bonds are somewhat riskier, however, because they lack the diversification of a mutual fund, and they are more cumbersome to buy and sell.
For the investor seeking stability outside of a bond fund, a package of short-to medium-term Treasuries looks attractive, especially since the US Treasury lowered the minimum purchase to $1,000. The T-bills can then be liquidated at maturity or rolled over if the outlook on the financial front remains uncertain.
"I used to think bonds were pretty boring," says Greenberg. "But I'm sleeping well at night."
Some better-known mutual-fund companies, each with many bond funds, include:
* American Century-Benham: $2,500 minimum investment, $1,000 for IRAs. 800-345-2021.
* Fidelity Investments: $2,500 minimum, $500 for IRAs. 800-544-8888.
* Franklin Templeton Group: $1,000 minimum, $250 for IRAs. 800-632-2350.
* PIMCo Funds: $2,500 minimum, $1,000 for IRAs. 800-426-0107.
* Scudder Funds: $2,500 minimum, $1,000 for IRAs. 800-225-2470.
* Vanguard Group: $3,000 minimum, $1,000 for IRAs. 800-662-7447.