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Investors warm to bonds amid increased volatility

Bond_market_conceptBoth corporate and government bonds are gaining investor confidence with the latest figures showing that perceptions of overvaluation have dropped since the third quarter of 2018.

The results from the CFA UK’s quarterly Valuations Index showed that the proportion of those who think government bonds are overvalued dropped from 67 to 61%.

A similar attitude towards corporate bonds is prevailing, although they are considered worse than their government counterparts. In the third quarter of 2018, 76% of investors thought corporate bonds were overvalued, but that figure has dropped to 69%.

In a statement the British division of the CFA Institute said the findings point towards “a risk-off mentality among investors in the face of continued market uncertainty.”

If equity markets recover there could be an improvement in the valuations of emerging market equities, with 22% of respondents saying they see value in the asset class.

The survey was open to all CFA UK members and there were a total of 191 respondents. Of these, 86% said gold is either fairly valued or undervalued – the highest proportion since the Valuations Index was launched in the first quarter of 2012.

“We have been experiencing rising market volatility in the last two quarters and, given this, it is understandable that we are seeing trends towards bearishness and de-risking among investors at the moment,” says Will Goodhart, chief executive of CFA UK.

“Our members’ perceptions of bonds have improved and there have only been minor changes in investor sentiment towards equities and gold,” he added.

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