Rising wages historically have been one of the primary causes of inflation. When you buy longer-term bonds, you typically get higher yields. But risk increases, too. Bond analysts look at the likelihood that a bond issuer will default. The U.S. government guarantees Treasury securities, so there's no credit risk.
Corporate bonds carry credit ratings, like individuals.
But the lower the rating, the higher the yield. But corporate bonds offer the best value, says John Bender, manager of Strong Corporate Bond. He recommends Sprint bonds that mature May 1, 2004. They have a relatively low credit rating, but are still well above junk-bond status. Pimco's Gross likes mortgage-backed securities, easiest for investors to buy through GNMA bond funds.