The classic bond-buying opportunity when interest rates drop: Investors can lock in high yields and defer interest income, too. One study calculates that 20-year, AAA-rated industrial bonds rose an average of 15.6% during five interest rate seings. These seings, from peak to trough, usually lasted for about one year.
Conservative strategy: AAA-rated coporates or Treasury issues.
Aggressive strategy: Lower-rated issues that swing more in price, providing greater tax deferral (and greater risk). However, even speculators avoid bonds rated lower than A when the depth of recession is not completely clear.
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