The head of UBS Group AG warned that a global rise in asset prices isn’t a development that is likely to portend well for markets.
In a Tuesday interview on Bloomberg TV (paywall), Sergio Ermotti, who has run Switzerland’s largest bank since 2014, says monetary policy across the world is creating unnatural conditions that he finds unsettling—even problematic.
The value of sovereign debt with negative yields has surpassed $13 trillion, as central banks attempt to juice slowing economies. That has led to a scramble by investors for assets that yield more than zero but are also comparatively riskier than government bonds.
Read: UBS puts FT reporter on blast as Swiss bank is angered by earnings story
The 10-year Treasury note TMUBMUSD10Y, +0.13% was yielding 2.06% on Tuesday, while German bonds TMBMKDE-10Y, -2.96% often viewed as a proxy for the health of the European economy, were at negative 0.353%.
Ermotti’s comments come as the European Central Bank is expected to announce easing measures on Thursday at the conclusion its policy meeting, a week ahead of the rate-setting Federal Open Market Committee’s two-day July 30-31 gathering at which the U.S. central bank is widely expected to cut key domestic rates, currently at a 2.25%-2.50% range, by at least 25 basis points.
Stock markets, meanwhile, have been seeing aggressive buying, with the Dow Jones Industrial Average DJIA, +0.16% the S&P 500 SPX, +0.19% and the Nasdaq Composite indexes COMP, -0.06% trading near all-time highs.
Europe’s markets have been buoyant, managing strong year-to-date gains as central banks have adopted a more dovish, or accommodative, posture. That said, the Stoxx Europe 600 Index SXXP, +0.98% for example, was 6.4% from its April 15, 2015 record and Germany’s DAX, +1.64% as off 9.4% from its Jan. 23, 2018 record, according to Dow Jones Market Data as of Monday’s close.
“I’d be very, very careful about growing further the balance sheet of central banks,’’ Ermotti told Bloomberg.