Assets in bond funds rose to $2.6 trillion at the end of 2010 from $1.5 trillion at the end of 2008, according to the Investment Company Institute.
Fixed-income securities have returned an average of 3.73 percent this year, according to Bank of America Merrill Lynch's U.S. Market Index, which has about 10,300 securities with a market value of $17.9 trillion. The index has risen every month this year except in June, when it fell 0.3 percent.
Treasuries handed investors a 3.54 percent gain this year, the Bank of America figures show.
Growth Slowdown
Bonds are attractive as the economy slows, inflation remains contained and analysts push back their estimates of when the Fed will raise interest rates.
The median estimate of 62 economist surveyed by Bloomberg News from June 28 to July 7 is for gross domestic product to expand 2.5 percent this year. That's down from 3.1 percent in the January poll. Figures from the Labor Department on July 15 showed that consumer prices fell 0.2 percent in June, the first decline in a year as energy costs dropped.
Fed Chairman Ben S. Bernanke told Congress last week that the central bank is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling.
Futures traded at the Chicago Board of Trade show the Fed, which last month ended its $600 billion Treasury purchase program, isn't likely to raise its target rate for overnight loans between banks from a range of zero to 0.25 percent until at least the second quarter of next year.
Thornburg Fund
"Yields are pretty low, but at the same time economic fundamentals in the U.S. and most developed markets are poor. So it's unlikely that the Federal Reserve will raise rates in the next year," said Jason Brady, a managing director at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees $84 billion.