Bonds overvalued in Q4, say CFA members

Both corporate and government bonds are overvalued are ‘overvalued or very overvalued’ in the fourth quarter, according to the latest survey of members of the CFA Society of the UK.

The CFA UK Valuations index reveals 81 per cent thought bonds were overvalued, compared with 73 per cent during the third quarter.

The percentage of people who thought corporate bonds were overvalued increased from 50 per cent to 73 per cent, from the third to the fourth quarter.

Respondents’ perceptions of equities were “relatively static” quarter on quarter. The most undervalued part of the equities market, according to the survey, were emerging markets stocks, with 49 per cent believing they were undervalued or very undervalued.

The index revealed 41 per cent of respondents thought developed market equities were undervalued.

However, gold continues to be thought of as overvalued, with 49 per cent of respondents thinking it overvalued’,

CFA UK chief executive Will Goodhart says: “Since the start of the year, yields of both government and corporate bonds have steadily fallen.

“Investment professionals have reacted by increasingly rating bonds as overvalued. While both developed and emerging market equities have experienced volatility over the year, investment professionals have consistently asserted that equities represent good value over a 12-month time horizon.”

The survey took place between 1 November and 13 November 2012 and included 435 responses from analysts and investors