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Bond Markets Scariest Gauge Worse Than Ever 1-14-2021
Posted: Friday, February 12, 2021

Around this time a year ago, I ruffled a few feathers among bond traders with the headline “This is the Scariest Gauge for the Bond Market.” The upshot was that when looking at the ratio of yields on corporate debt relative to it’s duration, investors were more susceptible to losses from a move higher in interest rates than in any time in history.

Well, if that gauge was scary in January 2020, it’s downright terrifying now. The “Sherman ratio,” named after DoubleLine Capital Deputy Chief Investment Officer Jeffrey Sherman, basically shows the amount of yield investors earn for each unit of duration.

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