Annualized yields on shorter-term corporate funds now are mostly in the 5% to 6.5% range, while intermediate-term funds yield 6.5% and higher. But the key is to look beyond the yields: Bonds of short- and intermediate-term maturities will drop less in value should market rates rise next year, at least when compared to the damage that would occur to very long-term bonds.

Carl Ericson, who manages the Colonial Strategic Income mixed-bond fund in Boston, figures the ability to be flexible will be more important than ever in an uncertain bond market next year. He now holds 45% of his fund in high-yielding corporate bonds, 25% in foreign bonds and the rest in shorter-term U.S. government issues. The fund's current yield: about 7.5%.

In Los Angeles, the First Pacific Advisors New Income fund, managed by Robert Rodriguez, holds about 63% of its assets in U.S. government agency issues (including mortgage bonds), and 22% in convertible and non-convertible corporate bonds. His fund yields about 6.7%.