Government bonds are more overvalued than any other asset class in the world, according to a new report from Deutsche Bank.

The report, obtained by CNBC, says that despite the global bond slump of recent months, yields haven't returned to their 1997-2012 averages in any of nine major developed markets.

That includes the United States, United Kingdom, Canada, Germany, Sweden, Norway, Switzerland, Australia and Japan.

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"We are only about half-way through to more 'normal' yield levels, with plenty of potential for overshoot," Deutsche Bank strategist George Saravelos wrote in the report, according to CNBC.

Japanese government bonds represent the world's most overvalued, he says. The high rate of domestic ownership and the Bank of Japan's huge easing program have helped insulate Japan from the global bond rout, Saravelos maintains.

Meanwhile, Treasury and U.K. Gilt yields are the ones that have risen closest to fair value, now standing about 50 basis points below their levels that prevailed pre-crisis, according to Deutsche Bank.

Saravelos sees fair value for the 10-year Treasury at 3.5 percent. It stood at 2.93 percent early Friday.

While German bunds are approximately 70 basis points over fair value, yields in all the other markets are at least 10 basis points below fair value, according to Deutsche Bank.

Bond legend Bill Gross, manager of Pimco Total Return Fund, apparently agrees with Deutsche Bank when it comes to Treasurys. The fund decreased the weighting of its U.S. government-related securities to 35 percent of total assets last month from 39 percent in July.

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