Bond Managers Caught in Liquidity Trap, Loomis’s Fuss Says

Central banks are creating a liquidity trap where money managers avoiding low-yielding bonds end up adding to reserves returning next to nothing, according to Daniel Fuss, vice chairman at Loomis Sayles & Co.

The collapse of inflationary pressures in the U.S. and abroad, combined with decisions by the European Central Bank and the Bank of Japan to buy government bonds, has fueled a rally in fixed-income that has limited the choices available to investors who want to earn higher yields than available in sovereign debt, said Fuss, one of the Boston-based managers of the $24.5 billion Loomis Sayles Bond Fund.