Government bonds overvalued, UK professionals say

Downing-streetGovernment bonds are considered most overvalued relative to fair value on a one-year time horizon, according to a number of UK-based investment professionals.

The CFA UK Valuations Index found 72% of professionals said government bonds are somewhat overvalued or very overvalued compared to only 12% who view them as somewhat undervalued or very undervalued.

Just 27% believe equities are overvalued, with developed market equities deemed slightly more undervalued by 47% of those surveyed, compared to 43% who said emerging market equities were more undervalued.

Will Goodhart, chief executive of CFA UK, a body for investment professionals, said the index attempts to identify where investors’ views temporarily depart from assets that offer fundamental value over the longer term.

“The current dislocations appear to be most likely attributable to the continued uncertainty about the global macroeconomic outlook and the prospects for inflation and interest rates,” he said.

Opinions from respondents were mixed for the valuations of corporate bonds, with a relatively even split of responses citing them as undervalued, fair value or overvalued.

However, the results appear to suggest that gold, a safe haven of 2011 is now relatively fully valued.

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