"In the corporate-bond space and junk-bond space, yields are still above historic highs," says Scott Burns, director of ETF research at Morningstar. Treasuries look pricey, he says, but Treasury Inflation-Protected Securities, or TIPS, make a good portfolio hedge right now. You can play this segment via the iShares Barclays TIPS Bond ETF (TIP).

Not only are they cheap, but ETFs also offer a way to diversify a portfolio, reining in risk. An investor can buy shares of a total-bond-market ETF like iShares Barclays Aggregate Bond (AGG) and "set it and forget it," says Larkin. Given the huge universe of bonds in the index, no one security, if it should run into trouble, can swamp a portfolio. The Barclays index is one of the most prominent fixed-income benchmarks.

The average return for this year through Oct. 13 for fixed-income ETFs was 7.81%, according to Morningstar. In 2008, the return was 2.50%. Among the big gainers: The SPDR Barclays Capital High Yield Bond ETF (JNK) returned an eye-popping 31.06% through Oct. 13. Although not strictly speaking a fixed- income ETF, the iShares S&P U.S. Preferred Index ETF (PFF) provided a 32.88% gain over the same span. Many bond investors are also active participants in the preferred stock market.

The average return for this year through Oct. 13 for fixed-income ETFs was 7.81%, according to Morningstar. In 2008, the return was 2.50%. Among the big gainers: The SPDR Barclays Capital High Yield Bond ETF (JNK) returned an eye-popping 31.06% through Oct. 13. Although not strictly speaking a fixed- income ETF, the iShares S&P U.S. Preferred Index ETF (PFF) provided a 32.88% gain over the same span. Many bond investors are also active participants in the preferred stock market.

In general, "there's been a lot of innovation and experimentation," says Ken Leon, an S&P equity analyst. That includes the usually staid municipal bond market. It has stalwarts like iShares S&P National Municipal Bond ETF (MUB), up 6.56% through Oct. 13, and SPDR Barclays Capital Municipal Bond (TFI), up 8.86%. But there is also a new Market Vectors High-Yield Municipal Index ETF (HYD) from Van Eck Global, which tracks the Barclays Capital Municipal Custom High Yield Composite Index. It's the first ETF to focus on high-yield munis, which include bonds from private issuers like nursing homes and hospitals and solar and wind projects that have a public purpose and qualify for tax-exempt status.

In general, "there's been a lot of innovation and experimentation," says Ken Leon, an S&P equity analyst. That includes the usually staid municipal bond market. It has stalwarts like iShares S&P National Municipal Bond ETF (MUB), up 6.56% through Oct. 13, and SPDR Barclays Capital Municipal Bond (TFI), up 8.86%. But there is also a new Market Vectors High-Yield Municipal Index ETF (HYD) from Van Eck Global, which tracks the Barclays Capital Municipal Custom High Yield Composite Index. It's the first ETF to focus on high-yield munis, which include bonds from private issuers like nursing homes and hospitals and solar and wind projects that have a public purpose and qualify for tax-exempt status.

In general, "there's been a lot of innovation and experimentation," says Ken Leon, an S&P equity analyst. That includes the usually staid municipal bond market. It has stalwarts like iShares S&P National Municipal Bond ETF (MUB), up 6.56% through Oct. 13, and SPDR Barclays Capital Municipal Bond (TFI), up 8.86%. But there is also a new Market Vectors High-Yield Municipal Index ETF (HYD) from Van Eck Global, which tracks the Barclays Capital Municipal Custom High Yield Composite Index. It's the first ETF to focus on high-yield munis, which include bonds from private issuers like nursing homes and hospitals and solar and wind projects that have a public purpose and qualify for tax-exempt status.

Another new ETF is the SPDR Barclays Capital Convertible Bond (CWB), the first to invest in convertibles -- hybrid securities that pay interest like bonds but also participate in the underlying stock's upside. In general, this high-risk, high-reward ETF is marketed to financial advisors, says Anthony Rochte, senior managing director at State Street Global Advisors.