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Kinnel: Managers See Little to Like in Bonds

Managers at the Morningstar Investment Conference paint a gloomy scenario for fixed income, reports Morningstar FundInvestor editor Russ Kinnel.

Russ Kinnel: Let's talk bonds.

Yesterday, we heard from three great bond managers: Elaine Stokes of Loomis, Sayles; Gibson Smith of Janus; and Laird Landmann of TCW MetWest. This morning we heard from Dan Ivascyn of PIMCO Income.

My big takeaway: I don't want to invest in bonds.

They were very frank and told us they really didn't like anything. What they liked least was emerging-markets bonds and agency mortgages, though we did hear from Ivascyn that he actually does like Mexico and Brazil. But really they didn't say there was a lot to like.

If that wasn't bad enough, they said liquidity is drying up. There aren't as many dealers out there willing to take bonds, so they're worried about that. So it was a pretty gloomy scenario.

Ivascyn did say one cure for the liquidity issues is closed-end bond funds trading at a discount, because obviously you don't have to worry about outflows at a closed-end fund.

But it was pretty gloomy. One encouraging note was just hearing Ivascyn, a manager from PIMCO, talking about bonds and investing in a very sober fashion. After last year's drama with Bill Gross, it was nice to hear a PIMCO manager just talking about investing in a sober, calm way. That was at least encouraging.