Bundesbank Warns Market About Overvaluation

Claudia Buch, the deputy president of the Bundesbank, told CNBC that there were “misaligned incentives” in the financial system and detailed her current concerns from ultra-low borrowing costs.
“It’s very difficult to identify bubbles, this is something we have learned from the crisis. If anything, looking at corporate bonds, syndicated loans, that’s an area where we are seeing tendencies of overvaluation,” she said.

“We see less so in equity markets but of course this statement is only as good as the underlying model we’re using.”

The ECB is buying fixed income assets of this kind in an attempt to combat low inflation in the euro zone which has helped to sap growth in some of the largest economies in the region. Buch claimed that her words were not a statement on this monetary policy. Nonetheless, she added that investors needed to be aware of the areas of overvaluation which might have an impact on financial stability.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza