Bond Funds Slip in Quarter

Bond mutual fund investors mostly suffered losses in the first quarter, as rising market interest rates cut into the value of older bonds, according to figures released Monday by fund tracker Lipper Analytical Services.

Funds that own long-term Treasury bonds were hit hardest. General Treasury bond funds dropped an average of 3.38% for the quarter, Lipper said.

Bond results are reported as “total” returns, meaning interest earnings plus or minus the change in the bonds’ values. A negative return means that the drop in the bonds’ prices more than offset interest earnings in the period.

Some first-quarter fund highlights, by category:

* Funds that own a broad array of long-term U.S. government-guaranteed bonds fell 1.95%, on average, after gaining 14.5% last year.

* Intermediate-term U.S. government bond funds--which typically own bonds maturing in five to 10 years--lost 1.56%.

* High-quality corporate bond funds lost 1.52%.

* California municipal bond funds eked out a positive return of 0.25%.

The quarter’s big winners: “junk” corporate bond funds, which soared an average 8.01% as junk bonds continued to rebound from their 1990 depression. Junk funds rocketed 36% last year.

Finally, investors who just stayed in money market funds in the first quarter earned 0.94%.