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Risk assets top Treasury bonds: Pro

Thursday, 31 Oct 2013 | 4:30 PM ET
Treasury space is overvalued: Pro
Thursday, 31 Oct 2013 | 12:41 PM ET
Heather Loomis of JPMorgan Private Bank said the Fed is looking for three things: improved employment, reduced fiscal concerns and rising rates' not negatively affecting markets.

Treasury bonds are overvalued, and investors would do well to move into riskier assets, Heather Loomis of JPMorgan Private Bank said Thursday on CNBC.

"You've seen massive risk-aversion," said Loomis, executive director of fixed income at the bank. "You've seen reallocation of institutional, of retail portfolios, out of stocks, into bonds. And you've seen a bond-buying program on the part of the Fed, the likes of which we haven't seen in 300 years. We do think that there is value in risk asset space."

Despite a better-than-expected increase in the Chicago Purchasing Managers Index, a gauge of regional manufacturing, Loomis told "Halftime Report" that she doesn't expect the Federal Reserve to slow its $85 billion-per-month asset-purchasing program until 2014.

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"What I have heard out of the Fed is that they're looking for three things: They're looking for employment to improve, and they're not just looking at the unemployment rate, which could be altered by changes in the participation rate," she said.

"They're looking for fiscal concerns to abate, and they're looking to make sure that the impact of the huge rise in rates we saw this summer isn't filtering through negatively to markets."

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Loomis, who oversees $11 billion in assets, also provided a nuanced view of municipal bonds.

"What I'm telling people right now to do is take a look at their portfolios inclusive of munis," she said. "If you've got things in there that are too long or too sensitive to rising rates, to reallocate now. It's a grace period."

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

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