Bonds backed by mortgages underwritten by Fannie Mae, Freddie Mac and Ginnie Mae, known as agency MBS,should also do well in a low-growth environment. These bonds, most of which carry an implicit government guarantee, offer yields double those of similar maturity Treasurys.

Continued government efforts to revive the housing marketshould limit the number of mortgages that fall into delinquency and keep principal and interest payments flowing to bondholders. The possible Fed purchase of MBS as part of another round of quantitative easing is also a positive, says Kimball.

Looking overseas, Molumphy places emerging markets bonds on the top of his list due to their higher yields, stronger GDP growth, and lower debt levels compared to the struggling economies of Europe and Japan.

EM bonds suffered from price declines and a foreign currency selloff in 2011 due to a flight away from risky assets. This action leaves them attractively valued with their economic advantages still in place.

“Investors have yet to price in the strong fundamentals of the developing markets,’’ says Buff Dormeier of Wells Fargo Advisors.

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