April brought a recovery in U.S. Treasuries, whose poor performance in March dragged down returns across the bond market. Domestic economic data, which had been fairly robust through the first three months of the year, began to come in below expectations, raising questions about whether the recovery in the winter had just been a mirage. This provided a lift to Treasuries, causing the yield on the 10-year note to fall from 2.22% to 1.91%. (Yields and prices move in opposite directions). The sharp decline in Treasury yields, in turn, fueled gains in both Treasury Inflation-Protected Securities and municipal issues. Investor sentiment remained generally positive despite the signs of slower growth, fueling investors' continued preference for the higher yields available in the investment-grade corporate and high-yield segments. High yield bonds remain the best performing asset class in the U.S. bond market year-to-date.

Below are the bond market returns for April 2012 and year-to-date through April 30.

April:

• Total U.S. bond market: 1.11%
• 10-Year U.S. Treasuries: 2.85%
• TIPS: 2.02%
• GNMAs: 0.69%
• Municipal bonds: 1.15%
• Corporate bonds: 1.40%
• High yield bonds: 1.04%

Year-to-Date:

• Total U.S. bond market: 1.41%
• 10-Year U.S. Treasuries: 0.59%
• TIPS: 2.90%
• GNMAs: 1.09%
• Municipal bonds: 2.92%
• Corporate bonds: 3.50%
• High yield bonds: 6.11%

* Indices used are: 10-Year Treasuries: Citi US Treasury 10 Year Index, TIPS: Barclay US TIPS Index, GNMAs: Barclay GNMA Index, municipal bonds: Barclay Municipal Bond Index, corporate bonds: Barclay Corporate Investment Grade Index, high yield bonds: Credit Suisse High Yield Index.

Is your high-yield bond fund underperforming so far this year? If it is, it may because it emphasizes the highest-quality issues. While over time this approach can help reduce the risks of investing in high yield bonds, it also would have dampened returns thus far in 2012. According to SeekingAlpha.com, the Barclays U.S. High Yield Corporate Index returned 6.44% through April 30. The two highest-rated segments of high yield - bonds rated Ba and B - underperformed with returns of 5.57% and 6.03%, respectively. Conversely, issues rated Caa returned 9.28%, while the lowest-rated segment - those rated from C to D - posted a gain of 11.96%. This performance disparity is indicative of a positive market environment in which investors are comfortable taking on more risk in search of higher yields.

The takeaway: if your high-yield bond fund is underperforming, it's may just because it owns a higher-quality, lower-risk portfolio. As we enter the summer months - a time of weakness for high yield bonds in four of the past five years - this may not necessarily be a bad thing.

Concerns about the potential for rising inflation are sending investors on a frantic search for the protection afforded by Treasury Inflation-Protected Securities , or TIPS. The demand is so high, in fact, that investors are willing to accept negative yields for the privilege of owning TIPS. According to Bloomberg, the 5- and 10-year TIPS were yielding -1.25% and -0.36%, respectively, as of mid-day on May 3. The demand is also reflected in the 11.38% 12-month total return of the largest exchange-traded fund that invests in the asset class, the iShares Barclays TIPS Bond Fund (ticker:TIP).

At this point, is it still worth investing in TIPS? In this article from the market commentary website SeekingAlpha.com, the author explores this issue in depth. If you hold TIPS or are considering an investment, the article is worth a read to find out if inflation protection is worth the cost of earning a negative yield.

On Wednesday, May 2, the U.S. Treasury announced that it hasn't yet decided whether to issue floating rate notes. While floating rate securities would provide another option for the United States to finance its growing debt load, officials could not reach a consensus as to the best way to set the variable rate. The option remains on the table and the Treasury said it would seek to reach a decision as soon as possible, but offered no specific guidance as to when a decision would be forthcoming. However, limitations in the Treasury's debt issuance systems will prevent floating rate notes from being issued at least until 2013.

Learn more: What is a floating rate bond?