"It's going to be boring" next year, said Dick O'Brien, a bond expert and senior executive vice president at Folger Nolan Fleming Douglas brokerage in Hunt Valley.

Federal Reserve policymakers plan to keep short-term interest rates low until employment and the economy pick up, so yields on bonds will remain low, he said.

"We will end next year very close to where we are presently," O'Brien predicted, "unfortunately for investors and savers."

O'Brien said some clients have been so disappointed in bond yields that he recommended high-grade common stocks that pay dividends, such as Microsoft, ExxonMobil and Johnson & Johnson.

"This is heresy for a bond person," O'Brien said. But Microsoft's 10-year bond this month had a yield of about 2.2 percent, while the dividend yield on its common stock was 3.38 percent, he said.

Investors often consider bonds safer than stocks, but some experts warn against forgetting the big risk to bonds — rising interest rates. When rates rise, the price of bonds falls.

Fehr of Edward Jones said long-term rates — those affecting 15- to 30-year bonds — might begin to tick upward next year. That would be bad news for the many investors who purchased long-term bonds seeking higher yields.

"It's nearly impossible to project when interest rates will move and where they will go," Fehr said. But at this stage, he added, rates are more likely to go up than down.

eileen.ambrose@baltsun.com

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