When you purchase a bond mutual fund, you're buying into the bond market. That's anything but stable. The variety of bond funds is vast. There are municipal funds, bond-index funds and funds that mix and match from many categories. The credit risk of bond funds is only as good as the bonds it holds.
Junk is still junk, though blending junk with non-junk can lower the impact of nasty surprises.
Foreign bonds carry significant risks from changes in currency values. But bond funds are not surrogates for holding a bond to maturity. Bond funds buy and sell debt securities, or IOUs, as their managers deem necessary to conform with their goals. They pass along capital gains or losses to the shareholders, along with the interest paid by the bonds. Fund performance is measured by total return, the percentage change in the overall value of the investment.