Fund managers warn of liquidity crisis in corporate bonds

Global fund managers have warned corporate bonds are the most overvalued they have ever been and are at risk of a sell-off, while liquidity conditions are getting worse.

A survey by CFA UK of 300 global fund managers found four out of five managers felt bonds were overvalued, especially corporate bonds, the FT reports. Investors are concerned that new capital rules implemented for banks and a clampdown on proprietary trading has caused a liquidity squeeze, meaning a mass sell-off could trigger a credit crisis.  Last week, the Bank for International Settlements cautioned that liquidity was concentrating in the most readily traded securities and that "conditions are deteriorating in the less liquid ones", the Telegraph reports. Treasuries suffered ...