…only 15 cents a year per $100 under management. Monthly distributions. Recent yield: 6.3%.

TIPS From Uncle Sam

Perhaps the most surprising bond bargain, though, comes courtesy of the U.S. Treasury. Since 1997, the government has issued Treasury Inflation-Protected Securities (TIPS), bonds whose principal adjusts in step with the Consumer Price Index. (See also: "Your Recession Survival Guide.")

Thus, if you buy a $1,000 TIPS bond and consumer prices rise 3% in a year, the principal value of your bonds will increase to $1,030. The interest paid on the bond will also go up by 3%.

Last spring, investors were maniacally chasing inflation hedges, including TIPS. The real (inflation adjusted) yield on some TIPS maturities fell below zero, meaning that you were lending money to the government for a guaranteed loss of your purchasing power. Dumb!

The wheel turns, however—and now, suddenly, the crowd is worried about depression and deflation. TIPS prices have plunged, driving up real yields to as much as 3% recently.

While 3% real isn't a Megabucks payoff, it's a good return historically for an instrument as safe as U.S. Treasury bonds. (At 3% real, a 3% inflation rate pushes up the face value of your bonds 6% in a year.) In addition, today's real yield is the highest since 2002, so you're getting the best deal in six years.

The Treasury issues TIPS in three maturities: five, 10 and 20 years. Minimum purchase, if you buy them online directly from the government, is only $100. Because the 10-year is auctioned most frequently (the first month of each quarter), that's the maturity I generally recommend for individual investors. For details on how to submit a bid, visit www.treasurydirect.gov.

The only thing I don't particularly like about TIPS is that…