Date
25 November 2017
Fears are growing of a bubble in the bond markets as investors have loaded up on high-yield and corporate debt. Photo: Bloomberg
Fears are growing of a bubble in the bond markets as investors have loaded up on high-yield and corporate debt. Photo: Bloomberg

Bonds in a bubble, global fund managers warn

Global fund managers are warning of a bubble in the bond markets as valuations of several instruments are seen stretched, Financial Times reported.

In a survey conducted by CFA UK, four out of five fund managers said bonds were overvalued, the report said.

Corporate bonds are more overvalued than ever before, while government bonds are the most overvalued asset class, according to the survey of 300 fund managers.

“You only know you’re in a bubble when it pops. But this market could pop. There is more tension and anxiety over valuations than for a long while,” the report quoted Brad Crombie, head of fixed income at Aberdeen Asset Management, as saying.

In the past six years, low interest rates and central bank quantitative easing have prompted investors to chase investment grade, high yield and emerging market bonds, pushing up valuations.

“There could be a bubble as investors have loaded up on high yield and corporate bonds. If we do see a reverse in the market, there could be price dislocation and a messy unwind,” said John Stopford, head of multi-assets at Investec.

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FL/RC

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