Although U.S. investors wouldn't know it, world bond funds enjoyed a respectable year in 2005, a recent report from The Wall Street Journal indicates.

Collectively, according to Chicago-based fund tracker Morningstar, world bond funds returned a lackluster minus 3.2% in dollar terms. But that's mostly because the dollar, which many experts thought would weaken in 2005, gained nearly 14.6% against the euro and 15.2% against the yen. In local currencies, they actually performed nicely.

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