The Case for Keeping Your Treasurys; Hough: The case for a Treasury bubble seems so clear that investors might be tempted to dump them altogether. They should reconsider.

More than three decades into the bull market for bonds, Treasury yields are shockingly low. The 10-year note pays 1.6%, less than a quarter of its long-term average.

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The case for a Treasury bubble seems so clear that investors might be tempted to dump everything and seek higher yields in riskier bonds or even change their, say, 60/40 mix of stocks and bonds to 100/zilch.

They should reconsider. Treasurys do more for investors than provide a dribble of income -- they also provide a safe haven when trouble strikes and other assets tumble. A safer approach is to boost yield a little bit without taking gobs of extra risk.

Calling a top in the Treasury market, after all, is more difficult than it looks. Bond king Bill Gross of Pacific Investment Management Co. did so early last year -- and his returns suffered. The 10-year note has returned 19% in price gains and income over the past year, versus 4.4% for the Standard & Poor's 500-stock index.

People who think yields can't go lower should look to Japan, where 10-year government bonds yield 0.8%, or Germany, where two-year issues have negative yields.

True, bond prices, which move in the opposite direction of yields, likely will fall if interest rates spike. What's more, consumer prices increased 1.7% over the year through June. If that persists, rising costs will gobble that 10-year yield and then some.

But the Federal Reserve has indicated it will keep interest rates low through at least 2014 to combat a weak economy. A Friday report from the Commerce Department showed that economic growth has slowed. If the U.S. slips into recession, risky assets could slide and consumer-price growth could slow or even reverse -- making even meager Treasury yields a good deal.

With that in mind, here are four ways to tinker with your Treasurys without doing anything drastic.

Strategy 1: Go long

Treasury buyers have crammed into shorter issues of late, leaving the "yield curve" unusually steep, says Scott Kimball, co-manager of the $131 million BMO TCH Corporate Income fund. While the 30-year bond yield of 2.6% might not look generous, it is higher than usual relative to the five-year yield of less than 0.7%.

The higher yields also may bring potential for price gains. Mr. Kimball expects the yield curve to flatten as investors reassess the likelihood of the economy remaining weak and buy longer bonds. If the 30-year yield falls to 2% over the next year, holders of those bonds could see 20% price gains, he says.

Strategy 2: Build a barbell

Corporate bonds usually offer higher yields than Treasurys. But the highest-quality ones don't offer much more. Ten-year, AA-rated issues from companies with sparkling credit yield about 2.6%, according to BondsOnline.

Low-quality "junk" bonds still pay plenty; the Finra/Bloomberg U.S. Corporate Bond index yields over 7%. But junk has a much greater risk of default.

With a "barbell" approach, an investor can favor long maturities for Treasurys and top-quality corporates, thereby boosting their yields, and short maturities of junk bonds, which helps to manage their risk. (The longer the bonds, the greater the uncertainty over a company's future financial strength.)

Pimco 0-5 Year High Yield Corporate Bond Index (HYS), an exchange-traded fund, costs a moderate 0.55% of assets per year, plus trading commissions, and yields close to 6%.

Strategy 3: Tap munis

Ten-year, AA-rated municipal bonds currently yield about 1.9%, or a third of a point more than 10-year Treasurys, and munis are free from federal taxes for most buyers.

To find the safest ones, avoid states with high unemployment or lots of home foreclosures, says Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management. Also, focus on "general obligation" bonds (backed by the issuer's ability to tax), or "revenue" bonds that are backed by income from building something necessary (think water systems, not stadiums).

Strategy 4: Add some mortgages

Mortgages that are turned into government-backed securities with names like Ginnie Mae and Fannie Mae yield around 2.2% for new issues.

There is no telling their "duration," or how quickly home buyers will repay the money, but the average is about seven years, considering how many homeowners move or refinance, says Anthony Valeri, a market strategist at LPL Financial in San Diego. Seven-year Treasurys yield only about 0.9%.

An exchange-traded fund of mortgage-backed securities, iShares Barclays MBS Bond (MBB), costs 0.26% a year, plus trading commissions.

There is nothing magical about these strategies. All involve taking greater risk for extra yield. Not all investors should add risk, especially those who are in retirement.

Even for working savers, the safest way to make up for low yields is to spend less. When it comes to socking away pay, "15% is the new 10%," says Christopher Philips, a senior analyst at Vanguard's investment strategy group.

That isn't any fun, but a penny saved beats a penny blown on bold portfolio bets.

—Jack Hough is a columnist at SmartMoney.com. Email: jack.hough@dowjones.com