Brian Chappatta, Columnist

This Is the Scariest Gauge for the Bond Market

Corporate-debt investors have never received this little yield for taking additional duration risk.

January 9, 2020 at 11:00 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Creator of the “Sherman Index.”
Photographer: Joe Buglewicz/Bloomberg

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At this point, few superlatives are left to describe how historically expensive the bond market looks. The 30-year Treasury yield is just a few months removed from an all-time low of 1.9%. U.S. investment-grade corporate debt just posted its best year since 2009, returning 14.5%. Junk bond yields hit a five-and-a-half-year low of 5.08% and could keep going.

Jeffrey Gundlach, DoubleLine Capital’s chief investment officer, sounded off on some of this during his annual “Just Markets” webcast earlier this week. He said long-dated Treasury yields are bound to rise and that double-B rated junk debt is one of the worst fixed-income investments available. But it’s his deputy CIO at DoubleLine, Jeffrey Sherman, who has a measure of the unprecedented market that might just be the scariest gauge of all for bond traders.