Bond strategist to CNBC: 'Get out of bonds'

With fixed-income yields at record lows—and even negative in some places—a senior broker has told CNBC that now is the perfect time for investors to sell and move into equities.

"As a bond man, I've got to say 'get out of bonds and into stocks' and believe me that was a painful thing to say," Bill Blain, the senior fixed income strategist at Mint Partners, a division of New York's BGC Partners, told CNBC Tuesday.

The massive amount of liquidity that has been injected into the financial system by the world's central banks since the collapse of Lehman Brothers in 2008 has meant investors have piled into debt markets and have consequently narrowed the interest rates paid out. Yields have an inverse relationship to the price of a bond. This search for yield has grown so intense that Nestle's short-term euro-denominated bond yield recently fell into negative territory.

Traders at the CME Group's Chicago Board of Trade
Tim Boyle | Bloomberg | Getty Images
Traders at the CME Group's Chicago Board of Trade

This has left analysts debating whether it is the first time in history that a corporate bond had seen such a move, and effectively means that the food and beverage giant is getting paid to borrow money.

Blain explained that passive investors and pension funds have little option but to invest in low-yielding debt in the sovereign bond markets but was incredulous at the surging price of corporate debt.

"To me it very much looks to me that bonds are fully priced. We have something like 40 percent of the developed world's bonds trading with negative yields," he said. "Why would you want to invest in negative yields in the credit market?"

As well as the extra liquidity provided by central banks, economists like Nobel laureate Robert Shiller believe that it is a general sense of fear - including the potential rise of technology - that has driven people into fixed income, which has seen a bull market lasting for the best part of twenty years.

Blain, meanwhile, has previously spoken of his concerns over the bond markets as the U.S. Federal Reserve and the Bank of England look to normalize policy once more. In late 2013, he warned of bond market "hell" in 2014 which failed to materialize but still predicts "slaughter" and "mayhem" ahead.

"At the moment, the stock market looks much more attractive. When we see rates start to back up, that's when we'll see a very quick slide. We always get during that changeover period in bond markets when rates start to rise and it's usually fairly dramatic and fairly painful," he said.

Kerry Craig, global market strategist at JPMorgan Asset Management, agrees that moving into equity markets would be more beneficial for investors. He told CNBC Tuesday that good dividend paying stocks can be found in battered euro zone bourses. He said that cyclical stocks - that react to fluctuations in the global economy - are his preference but said health care firms are some of the most expensive currently.

"Equity markets can deliver at the moment," he said, paying particular attention to retired investors that are searching for yield over shorter term.