Fuss buying high-grade US corporates

NEW YORK (Reuters) - Dan Fuss, the vice chairman of Loomis Sayles, which oversees $100 billion in fixed-income assets, said on Thursday he has been buying long-maturing investment-grade U.S. debt securities.

Fuss told the Reuters Investment Outlook Summit in New York, however, that the bonds are getting "pricey" and that they are no longer the "screaming buys" they once were.

"What I have bought are long investment-grade corporates and now probably have enough of ... although I would buy some with new money," he said.

Outside of the United States, Fuss has been buying Australian and New Zealand debt and said he also likes debt in Canadian dollars. But Fuss added that he is more cautious on the country, given the current political situation.

In emerging markets, Fuss has been a seller of dollar-denominated Mexican sovereign debt, but has kept Mexican bonos. He has no holdings in Central Europe and Russia currently, remarking that the political situation is too difficult to grasp.

"I can't figure out the politics out there," he said. "But quite frankly, I don't like what I see."

On Thursday, the Russian central bank allowed the fifth 1 percent devaluation of the rouble against a dollar/euro basket in a month as data showed a $17.9 billion drop in gold and foreign exchange reserves last week.

Fuss, who earlier this year told Reuters that the U.S. recession started on November 15 of last year, said the economic recovery could begin in the third quarter of 2009.

Even so, average annualized growth for the next year will be negative 2 percent, he said.

The corporate bond market has been showing signs of recovery, with buyers scooping up beaten-up securities, and compared with the environment in early October, the investment-grade sector is doing a "great deal better," Fuss said. For example, the benchmark investment-grade credit derivative index hit a wide of 232 basis points on October 10 and narrowed to around 180 to 190 basis points early November.

As for insuring his debt purchases in the credit default swap market, Fuss said he will stay away from that market until CDS are traded on an exchange.

"I won't use a clearing house," he said. "I want them (CDS) to trade like copper or wheat. I want full transparency, I want to know exactly what I have: the more transparency, the more comfortable you feel."

(For summit blog: summitnotebook.reuters.com/)

(Editing by James Dalgleish)