(FORTUNE Magazine) – So far it's been a banner year for bonds. Over the nine months ended in September, long-term Treasuries racked up a 14.6% total return, counting price appreciation and interest. Don't expect those hefty double-digit returns to continue. With bond yields already down and inflation likely to heat up, the bondholders' margin of comfort has thinned. The yield on 30-year Treasury bonds, 8.08% in early October, is only 3.6 percentage points above the recent inflation rate of 4.5%, a modest cushion compared with the five percentage points of the early 1980s. Unless your Ouija board points toward recession in the months ahead, this is not the time to be loading up on long-term bonds. If economic growth continues, as FORTUNE expects, bond yields may creep up slightly. That's no reason to stop buying bonds; just keep the maturities under ten years. The shorter the maturity, the less volatile the price. Since 30-year bonds are yielding roughly the same as one-year bills, the reward for a riskier bet isn't there. Here's a review of the opportunities and risks in the different sectors of the fixed-income market: -- GOVERNMENTS. Even a modest rise in interest rates is enough to punish holders of zero coupon Treasuries. Because the accumulated interest on these bonds is automatically reinvested at a preset rate, their prices have more downside risk than those of coupon-bearing securities, which allow you to reinvest interest at the latest prevailing yield. For those seeking the highest possible coupon while retaining Uncle Sam's guarantee, mortgage-backed securities issued by the Government National Mortgage Association, or Ginnie Mae, yield up to 1.5 percentage points more than Treasuries. The catch: Ginnie Maes can be repaid early if interest rates decline. -- CORPORATES. The junk bond market was jolted in September by news that highly leveraged Campeau Corp., owner of Bloomingdale's and other department stores, was having trouble meeting interest payments. For all but the most fearless, junks are too risky. Stick to investment-grade corporates. -- CONVERTIBLES. The yield on investment-quality convertibles, recently in the 6.5% to 7% range, is well below the 10% an investor could get on a straight corporate bond. But it's more than double the yield on the average common stock, and these stock-bond hybrids are now reasonably priced. The median conversion premium -- the percentage by which a convert's price exceeds the value of the underlying stock -- is down to 23%, well under the 32% of early 1988. But steer clear of convertibles that give issuers the right to redeem them in the near future, cutting off those fat yields. Warns Mark Hunt, a convertible analyst at Smith Barney: ''More than 80% of outstanding convertibles will become callable within the next year.''

-- MUNICIPALS. It's a great time to buy municipals. The 7.6% rate on revenue bonds -- for example, those backed by tolls from a bridge or tunnel -- is 94% as high as the rate on taxable long-term Treasuries. For those in the 28% tax bracket, that's the equivalent of 10.5% before taxes, far above Treasuries. Don't wait for muni yields to improve. If they get any closer to taxable yields, even tax-exempt pension funds may start grabbing them, driving prices up and yields down.

CHART: NOT AVAILABLE CREDIT: SOURCES: DONOGHUE'S MONEY FUND REPORT; THE BOND BUYER; SALOMON BROS; FIRST BOSTON CAPTION:QUALITY BONDS ARE PAYING LESS Amid a general downtrend, only junk bonds pay high and rising interest, reflecting investor worries.