In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers whether global fixed-income markets are in bubble territory, and if so, which ones are overvalued.
Less than 10% of respondents said that no fixed-income markets are in bubble territory. We can then extrapolate that a supermajority believe that at least one fixed-income market is overvalued. In a world where yields on sovereign debt are at all-time lows and where negative nominal yield debts are routinely being priced, it makes sense that 22% of respondents single out fixed-income markets as being the most in bubble territory.
Overheated sovereign markets have clearly driven a global quest for yield. Many high-yield debt markets are hitting all-time highs in issuance, and the demand for more high-yielding debt is hardly sated. This development has not escaped the watchful eyes of readers, with 18.5% indicating that they believe high-yield markets are in bubble territory.
Investors on the quest for yield along with safety are also plowing capital into investment-grade corporate securities, but only about 6.3% of respondents believe that these markets are overbought. About one in six respondents stated that more than one of the fixed-income markets is in bubble territory and a whopping one-fifth believe that all of the markets listed are price rich. In an uncertain macro-environment world where global central banks seem willing to underwrite anxieties, the end of fixed-income bubble markets seems far off.
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