Developed Market Bonds are Significantly Overvalued

Bonds are looking overheated - but they are still an important part of a balanced portfolio. Where can you find value in the fixed income markets?

Dan Kemp 4 January, 2018 | 8:01AM

Bond prices could be due to fall off a cliff

With interest rates and bond yields near all-time lows, it should be no surprise that bonds look expensive in absolute terms. We know from history that a low starting yield can have a sizeable impact on future return expectations, and our valuation framework supports this notion.

Developed Market Bonds: Low Conviction

Government bonds in the UK, Europe and Japan are significantly overvalued with many yields below or just above zero. US government bonds, while offering better value, are also considered expensive, according to our analysis.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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