Opportunities are dwindling and risks are rising for funds that focus on Treasury bonds. By Stacy Rapacon, Online Editor January 6, 2009 Over the past year, when little else worked, you could seek shelter in the safety of Treasury bonds.Terrified investors abandoned just about everything that smacked of risk and poured money into Treasuries, boosting their prices and slashing their yields. In early December, ten-year Treasuries yielded 2.7%, the lowest level in more than 50 years. As a result, funds that focused on Treasuries shined in 2008. At the top of the winners list of medium-maturity government-bond funds is T. Rowe Price U.S. Treasury Intermediate, which beat its peers over the past year by an average of eight percentage points. The fund owns only "the gold-standard" of bonds, says manager Brian Brennan. It recently had about 85% of its assets in regular Treasury debt as well as Treasury inflation-protected securities. The rest was in Ginnie Maes. Brennan acknowledges that a repeat of the past year's performance is unlikely. He believes, however, that rates will stay low through 2009 and that "we're nowhere near" a return to significantly higher yields. Advertisement But what if rates shoot up? The Price fund's average duration, a measure of rate sensitivity, recently stood at 5.5 years. That means that if rates rise one percentage point, the fund will lose about 5.5% of its value. Barring a depression, which could cause the cost of money to fall further, rates seem far likelier to rise than to fall from current levels. Their winning status aside, the risks seem too high to justify investing in Treasury funds today.