He is also the US's best-performing bond manager this year.

"These active bond managers were simply waiting for someone to go first, waiting for a catalyst to ignite a predictable rally."

Since 1986, for example, Pimco, the giant bond manager, has offered to combine the beta of traditional stock indexes with the return of short-term bonds.

Because these agreements have such "loopholes," some bond managers have not been convinced that these bonds offer enough protection.

I am one frustrated bond manager right now," he said.

William H. Gross, the nation's best-known bond manager, is in the middle of a five-year, $200 million contract.

Some bond managers are tinkering with their portfolios to take advantage of price differences among Government issues, corporate bonds and mortgage-backed securities.

Merrill Lynch suspended three of its municipal bond managers pending the outcome of the Federal investigation.

What appears to have happened is that a lot of bond managers, including some whose clients thought they were more conservative, had bought Latin bonds.

Still, some bond managers say the Federal Reserve is unlikely to raise short-term rates soon, given the slow pace of economic recovery.