In a Business Insider interview in February (2013), Dan Fuss** stated that the world is changing and bonds are the most overbought he’d seen in his 55 year career. He also told this to the Milwaukee CFA Society during his January presentation.
For years, investors watched in disbelief as the 30-year bull market in fixed-income assets raged on, leaving bears in the dust. The bond skeptics are having another moment, as talk grows of a "great rotation" from bonds into equities, as rates finally start to rise, and the economy turns back into the old normal. Talk of the end of quantitative easing also is seen as a key driver.
Dan Fuss of Loomis Sayles is the third bond fund manager to be called a "bond god" (the other two are Bill Gross and Jeff Gundlach). He is strongly of the view that the current fixed income market is out of control, and that a reckoning is coming. [Looks like his call was again 'spot on'].
From a Bloomberg interview in February Fuss said:
“This is the most overbought market I have ever seen in my life in the business,” Fuss, 79, who oversees $66 billion in fixed-income assets as vice chairman of Boston-based Loomis Sayles & Co., said in an interview in London. “What I tell my clients is, ‘It’s not the end of the world, but for heaven’s sakes don’t go out and borrow money to buy bonds right now.’”
“The world is changing,” said Fuss, who started in the investment business when Dwight Eisenhower was U.S. President. “We are coming off a period of very low interest rates because the central banks have been buying the bonds. Interest rates are going to go up.”
The idea of the bond bull run coming to an end seems more popular now that yields have risen nearly 100 bps in the past month (see chart).
** Dan Fuss has 55 years of experience in the investment industry and has been with Loomis, Sayles & Company since 1976. He is vice chairman of the firm and manages the firm’s flagship Loomis Sayles Bond Fund—which won the 2009 Morningstar Fund Manager of the Year award in the fixed income category—in addition to the Loomis Sayles Investment Grade Bond, Investment Grade Fixed Income, Strategic Income, Fixed Income, Institutional High Income, Capital Income and Global Markets funds. In 2012, Dan received both the Institutional Investor Money Management Lifetime Achievement Award, and the Lipper Excellence in Investing Award. In 2000, he was named to the Fixed Income Analysts Society’s Hall of Fame in recognition of his contributions and lifetime achievements toward the advancement of the analysis of fixed income securities and portfolios. He has twice been president of the Boston Security Analysts Society. Dan earned a BS and an MBA from Marquette University. He served in the US Navy from 1955 to 1958 and held the rank of Lieutenant.