Unscripted: Loomis Sayles’ most exciting fixed income opportunities

Loomis Sayles’ experts believe higher yields, selected emerging market opportunities, and relative value in public credit could be a rich opportunity set for active fixed income investors.

Global fixed income and carry offer consistent opportunity

Scott Service: “Over the next six months or so we believe carry will be your friend. Underlying growth momentum is very positive. Corporate earnings have been stellar, especially in the US. Hyperscaler and AI capex are likely to have positive trickle-down effects on a number of other industries. Finally, we expect monetary policy to be somewhat supportive over the next six to 12 months or so. Brazil and New Zealand government bonds look very attractive to us from a carry perspective. We’ve been active in some securitized credit spaces, such as data centers and selected euro-pay floating-rate auto and personal loans. And even though spreads are tight, we’re comfortable with a small overweight to higher-quality corporate credit.”

Jennifer Thomas: “We’re looking at global securitized markets. Their consumers are different, their regulatory environments are different, and so the opportunity set is a bit different compared to the US. Other areas that we like are more niche-y, like hard assets, infrastructure, fiber, small business and working capital. They’re small sectors that not everybody wants to play in because they require a lot of due diligence but can offer a lot of opportunity.”

Emerging markets remain attractive

Pramila Agrawal: “This is a time when corporates and governments are simultaneously investing in defense, food security, data, AI and more, creating a genuinely broad opportunity set. In fixed income specifically, we think EM debt looks interesting. EM local debt, sovereign and corporate credit are offering good spreads currently. We’ve seen very big structural shifts in how these markets are run and how the economies are doing, the fundamentals look good, and it’s an area we find very attractive.”

Public/private credit convergence broadens the opportunity set

Matt Eagan: “We’re most excited about the convergence of public and private credit. Private credit has matured and grown so that it generally mirrors the public markets in terms of the scope of sectors and security types, and certain private credit sectors now trade on the secondary market. In many cases, structure of a private credit offering can often provide greater protection than a public one. Meanwhile, we’re seeing transactions come together among “clubs” of investors, much like private transactions, and then settling in the public markets. We think this convergence opens up a broad area of return potential for investors who can do their due diligence.”