7 out of 10 professional investors deem corporate bonds overvalued

More than two thirds of professional investors now deem corporate bonds overvalued, twice the number at the start of last year.

The CFA Society of the UK’s latest Valuations index reveals 68% of respondents now view corporate bonds as overvalued or very overvalued, compared to 34% in the first quarter of 2012. Government bonds are even more out of favour with 83% now branding them overvalued, up from 72% at the same point last year.

Despite the strong recent run in developed market equities, just 40% of investment professionals consider them overvalued, down from 47% in Q1 2012, despite most indices having delivered double digit returns over the intervening year.

Similarly, gold remains broadly out of favour and although the price of the precious metal has slipped by 8.57% over the last 12 months, 47% still view it as overvalued, albeit this is down from 61% this time last year.

Will Goodhart, chief executive of CFA UK, said: 'When we launched the Valuations index a year ago, the overwhelming majority of investment professionals viewed both government and corporate bonds as overvalued. They are even more certain that is the case today. The increase in those who see corporate bonds as overvalued has been particularly dramatic. On the other hand, despite the increase in equity values since our last survey, most respondents continue to believe that equities are undervalued – emerging market equities in particular.'