September 22, 2014 / 7:27 PM / 5 years ago

Investors warn on bubble risk as bonds seen overpriced

NEW YORK (Reuters) - Two widely followed big investors on Monday said that bonds are at worrisome levels, sounding the alarm about a potential bubble.

Traders work on the floor of the New York Stock Exchange March 17, 2014. REUTERS/Brendan McDermid

“Bonds are at ridiculous levels,” said Julian Robertson, whose Tiger Management was one of the world’s largest hedge funds in the late 1990s.

As a result, he said, there are few other places for many people to put money but stocks. That situation is “serious,” he said, speaking at a Bloomberg markets event.

“Bonds are way, way overpriced,” agreed William Conway, the co-chief executive of private equity firm Carlyle Group, who shared the stage with Robertson.

Neither Conway nor Robertson specified whether they were concerned about Treasuries specifically or more broadly about sovereign and corporate bonds.

Conway added that he didn’t see the catalyst that will eventually burst a bubble, which could make a drop in asset prices all the more surprising when it happens.

The yield on the U.S. 10-year Treasury note US10YT=RR has struggled to trade consistently above 2.6 percent this year from around 3 percent near the end of last year, even as the S&P 500 index .SPX has hit a series of record highs.

Nevertheless, the drop in Treasuries yields blindsided many investors and analysts this year, with lackluster U.S. economic data and geopolitical risks bolstering views the U.S. Federal Reserve could keep interest rates low for longer in the world’s biggest economy.

Other investors and analysts have also noted concerns with the bond market recently.

“Bonds are just a speculative trade as far as I’m concerned,” said David Rosenberg, chief economist and strategist of Canadian asset manager Gluskin Sheff, said to Reuters earlier this month.

“I see the bond market more overvalued than the stock market,” he added.

Robertson returned investor money in 2000 and focused on investing his own earnings in funds managed by his protégées, known on Wall Street as “Tiger Cubs.”

Reporting by Luciana Lopez; Editing by Chizu Nomiyama

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