NEW YORK (Reuters) – Loomis Sayles vice chairman Dan Fuss says the 10-year Treasury yield could go “north of 4 percent” within two years, but geopolitical risks and economic deterioration could keep yields lower.
Fuss, known as Wall Street’s Warren Buffett of Bonds, said on Tuesday at Loomis Sayles’ annual media luncheon “the pattern of (Treasury) yields” drifting higher should stay intact if there are no major geopolitical and domestic disruptions. “These are huge ‘ifs’,” said Fuss, who helps manage more than $268 billion.
Loomis said the firm is finding value in energy-linked stocks and corporate bonds, most of which include oil-producing emerging markets including Brazil and Colombia. Loomis said the firm is also looking at battered Russian and Mexican assets.
“We like Mexico, which has been punished because of the NAFTA (North American Free Trade Agreement) talks,” Andrea Dicenso, vice president of Loomis, said at the event. “We’re even looking at Russian assets which have become cheaper,” she said.
Dicenso said Loomis likes emerging market countries that are commodities-rich because they also offer higher positive real yields.” Dicenso said 2018 contrasts with previous years as the “increase in volatility is here to stay.”
Reporting By Jennifer Ablan; Editing by Chris Reese