Loomis Sayles' Fuss sees value in corporate bonds

"This is the best buying opportunity I have seen in investment-grade corporate bonds since, really, September 1974," when equities and bonds were both in bear markets, Fuss told Reuters in an interview.

Corporate bonds with "AA" ratings on average now yield about 7 percent, according to Merrill Lynch data. That's almost as much as junk bonds were yielding in March 2007, or about a year and a half ago.

Uncertainty over whether Congress will pass a controversial $700 billion financial bailout package hot on the heels of the collapse of Lehman Brothers and AIG has triggered a flight from risk across the financial markets, drying up demand for junk bonds and even higher-quality investment-grade bonds.

"There is no credit quality issue in corporate debt ... but people have to sell for one reason or another. It's an illiquid market which makes matters worse," Fuss added.

Fuss, armed with five decades of investment experience, is vice chairman of Boston-based Loomis Sayles, which oversees more than $100 billion in fixed-income securities.

Fuss said he's able to buy long-maturing "AA" rated corporate bonds at an average price ranging in the low 70 cents on the dollar, "and there's nothing funny about the bond". He declined to comment on what bonds he has been buying.

(Reporting by Jennifer Ablan; additional reporting by Dena Aubin; Editing by James Dalgleish)