Perception that corporate bonds are over-valued hits new record

Bond_market_conceptThe proportion of investors who believe corporate bonds are overvalued has hit a record high amid fears of possible interest rate hikes by central banks around the world as well as continuing political uncertainty in the US and Europe.

Eighty-four per cent of investors surveyed for the CFA Institute’s second quarter valuations index said that corporate bonds were over-valued.

This is the fifth consecutive quarterly increase and marks the highest level since the index was launched five years ago.

Government bonds were also seen as overvalued by 82% of respondents, marking a 4% increase from the last two quarters.

The vast majority of investors surveyed (69%) continued to consider developed market equities to be overvalued, a belief now widely held for over a year. This follows a sharp rise from 40% in the first quarter of 2016.

Investors also indicated that they were only finding value in emerging market equities as emerging market equities were largely perceived as either undervalued (41%) or having a fair value (34%).

Current perceptions of the value of gold on the other hand varied significantly. While 45% of respondents believed gold to have a fair value, 32% saw the metal as overvalued and a further 23% felt that it was undervalued.

Will Goodhart, chief executive of CFA UK, said: “We’re reinforcing the message that others have put out that valuations are high but may remain so and that emerging markets seem to offer relatively better value for the time being.”

CFA UK members were surveyed in May and 192 people took part.

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