US Treasuries likely to burn investors, warns Loomis Sayles

Bond house Loomis Sayles predicts the US Federal Reserve Bank will raise the fed funds rate in the third quarter of 2010, which should drive yields on the 10-year Treasury from the current 3.5% level to around 4.25% by the end of next year. "That probably means the price of Treasuries will eat away at the coupon, which could result in a negative return," says Kenneth Buntrock, Boston-based vice-president. Other US market participants have stated similar concerns. He expects trading …