The Case for Bonds: With Rates Rising, It's Time to Move Out of Money Funds
CASH MAY NO LONGER be king.</br></br>Sticking with a money-market fund has been a smart strategy over the past year, as interest rates have climbed and as short-term yields have rivaled those on longer-term bonds. But with 10-year Treasury notes recently breaking above 5% for the first time in almost four years, this could be a good time for cash investors to take a little more risk.</br></br>Here's the case for tiptoeing into short- and intermediate-term bonds, while also snapping up inflation-indexed Treasurys.</br></br>-- Stepping out. When interest rates climb, your first instinct should be to lengthen the average maturity of your bond portfolio, so you take advantage of the higher yields.</br></br>And interest rates, of course, have risen. At yesterday's market close, 10-year Treasury notes were paying a tad less than 5%, up from 4.4% at the end of 2005 and 3.1% in June 2003. Problem is, short-term interest rates have also climbed, pushing up the average yield on taxable money-market funds to 4.2%.