Okay, we've had a rebound in fixed income, but what next? Short-term gains are nice but today's economic conditions aren't built to last. All of the government's borrowing will eventually drive up long-term bonds rates, sucking some of the steam out of corporates. The Federal Reserve will someday have to put a normal short term borrowing rate in place. Today's carry trade and yield chase are temporary. So the best managers are planning ahead. The Loomis Sayles Bond fund has returned 31.5% this year, as low yields on short-term Treasury debt have enticed people to buy riskier securities like corporate bonds. Kathleen Gaffney, portfolio manager at Loomis Sayles, has started preparing for a time when the Federal Reserve raises interest rates. Gaffney has sold some corporate bonds in favor of ones with shorter maturities, reducing some of the potential havoc from higher rates. "The yield curve holds the fate of the market," she says.