Loomis Sayles's Fuss Backing Away From Euro-Demominated Debt

  • Vice chairman of the firm says he's "much more cautious"
  • Bargains still exist in high-yield market, Fuss says

Dan Fuss, who celebrates his 40th year at Loomis Sayles & Co. on Tuesday, has gotten "much more cautious" on European debt as interest rates in the region decline.

"It’s caused me to back away from Euro-denominated even though some of the yields are attractive," Fuss said in an interview on Bloomberg <GO> Monday. "I’m frankly amazed by negative rates. They didn’t cover this in business school."

The European Central Bank’s attempts to fight persistently low inflation
through negative interest rates and a bond-buying plan hasn’t stimulated price
growth in the region. Consumer prices dropped to minus 0.2 percent in February from a positive reading of 0.3 percent the previous month, according to data published Monday.

Fuss, who is vice chairman of Boston-based Loomis Sayles, said low interest rates on government debt and cash is pushing money away from Europe.

Refugee Crisis

While investors in recent days have been focused on northern Europe -- where the U.K. is debating its position in the European Union -- Fuss said the real problem for the continent is the strain of refugees coming in from the South.

"It’s not good," Fuss said. "I pray and hope for the best, but that’s not the way it’s trending."

Fuss said there are still bargains in the high-yield bond market, which did a "double bottom roughly coincident with stocks" in January and February. While there’s a lot less for sale right now, "it’s easier to sort out now in the energy space than it was a couple months ago," Fuss said.

Fuss co-manages the $15.3 billion Loomis Sayles Bond Fund, which has lost 9.3 percent in the past year, trailing 95 percent of peers, according to Bloomberg data. It has gained 3.2 percent over five years.

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