Did you take a look at the prospectus for the bond fund. It can invest 15% in junk and 25% in foreign securities. It says that under
normal market conditions it invests 80% in the following high-grade corp bonds grade A or better; mortgage or asset- backed securities and finally US gov securities.
My guess is that they are invested less in government securities and more in the other things this would increase the return. I US intrest rates go up the bond values will go down. Also with all the mortgage refinance going on they may get caught, refis are bad, recently FannieMae and FreddieMac dropped big time because of this. Also personal bankrupcies are at near record highs this is bad for bonds. You also have currency and default risk with the foreign investments.
The rate it returns shouldn't scare you off but what they invest in might. Plus the fund has an expense ration of 1.09% this is very high for a bond fund. One other thing that bothers me is that the prospectus doesn't tell you what they are investing in.
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