Loomis Sayles & Co. sold all Spanish securities from its $2.5 billion Global Bond Fund after a rally in the debt sent yields to a three-year low.
The fund favors highly rated sovereign debt including Treasuries, German bunds and Finnish bonds, and has retained some Italian securities, money manager Kenneth Buntrock told reporters in London. Government bonds accounted for 48 percent of the portfolio and corporate bonds 20 percent, he said.
“We’ve been opportunistic about buying Italian and Spanish bonds,” said Buntrock. “There are still problems in the region and we are concerned about growth. We preferred Italy to Spain, and we don’t own Portuguese, Irish or Greek government securities in our Global Bond Fund.”
The fund has reduced its holdings of the euro, together with the yen, to below levels called for by the benchmark it uses to measure performance, Buntrock said. It’s overweight the dollar and currencies of Asian countries outside of Japan, he said in an interview today.
Spain’s 10-year bond yield fell to 3.94 percent on May 3, the least since May 2010, from as high as 7.75 percent on July 25. The additional yield investors demand to hold the securities instead of benchmark German bonds narrowed to 271 basis points from 650.
“Our decision on peripheral bonds is driven by short-term factors such as spreads,” Buntrock said.
The yen declined 8.8 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as the Bank of Japan doubled monthly bond purchases in April to reach a 2 percent inflation target. The euro is the best performer, with a 4.1 percent advance.
“The currency bets are the biggest driver of our excess returns right now,” said Buntrock. “We’ve been short yen for years and we are currently around 7 percent underweight.” A short position is a bet an asset price will drop.
While the Global Bond Fund doesn’t own any Greek debt, the Boston-based money manager with $194 billion under management, holds it in its Strategic Income Fund. The bond, which it bought in February and June 2011, was issued in francs under Swiss law and will mature on July 5, said Matt Eagan, who manages the fund.