HOME

TheInfoList



OR:

The Bloomberg US Aggregate Bond Index, or the Agg, is a broad base,
market capitalization Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by t ...
-weighted
bond market index A bond index or bond market index is a method of measuring the investment performance and characteristics of the bond market. There are numerous indices of differing construction that are designed to measure the aggregate bond market and its vari ...
representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US
bond market The bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, b ...
. In addition to investment grade corporate debt, the index tracks
government debt A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...
, mortgage-backed securities (MBS) and asset-backed securities (ABS) to simulate the universe of investable bonds that meet certain criteria. In order to be included in the Agg, bonds must be of
investment grade In investment, the bond credit rating represents the credit worthiness of corporate or government bonds. It is not the same as an individual's credit score. The ratings are published by credit rating agencies and used by investment professionals ...
or higher, have an outstanding
par value Par value, in finance and accounting, means stated value or face value. From this come the expressions at par (at the par value), over par (over par value) and under par (under par value). Bonds A Bond_(finance), bond selling at par is priced at 1 ...
of at least $100 million and have at least one year until maturity.
Index fund An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can a specified basket of underlying investments.Reasonable Investor(s), Boston University Law Review, avail ...
s and
exchange-traded fund An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the ...
s are available that track this bond index. The index has been maintained by
Bloomberg L.P. Bloomberg L.P. is a privately held financial, software, data, and media company headquartered in Midtown Manhattan, New York City. It was co-founded by Michael Bloomberg in 1981, with Thomas Secunda, Duncan MacMillan (Bloomberg), Duncan MacMi ...
since August 24, 2016. Prior to then it was known as the Barclays Capital Aggregate Bond Index and was maintained by
Barclays Barclays () is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services. Barclays traces ...
. Prior to November 3, 2008 it was known as the Lehman Aggregate Bond Index and maintained by the now defunct
Lehman Brothers Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before Bankruptcy of Lehman Brothers, filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Gol ...
.


History

The precursor to the Bloomberg US Aggregate Bond Index was co-created on July 7, 1973 by Art Lipson and John Roundtree, both of Kuhn, Loeb & Co., a
boutique investment bank A boutique investment bank is a investment bank that specializes in at least one aspect of investment banking, generally corporate finance, although some banks strengths are retail in nature, such as Charles Schwab. Of those involved in corporate ...
. Lipson and Roundtree created two total-return indexes focused on US bonds: the US Government and the US Investment Grade Corporate Indexes. The indexes were blended in 1979 to form the Government/Credit Index. In 1986, mortgage backed securities were also added to the index, which was renamed the US Aggregate Index and backfilled with historical data to 1976. It was later renamed the Barclays Capital Aggregate Bond Index. The index was acquired by
Bloomberg L.P. Bloomberg L.P. is a privately held financial, software, data, and media company headquartered in Midtown Manhattan, New York City. It was co-founded by Michael Bloomberg in 1981, with Thomas Secunda, Duncan MacMillan (Bloomberg), Duncan MacMi ...
in August 2016 as part of a larger sale of the bank's index and risk analytics business. The index was subsequently renamed the Bloomberg Barclays US Aggregate Bond Index. Upon its acquisition, Bloomberg and Barclays announced that the index would be co-branded for an initial term of five years. In August 2021, Bloomberg announced the renaming of the index as the Bloomberg US Aggregate Bond Index.


Index characteristics

The Bloomberg US Aggregate Bond Index is a ''
market capitalization Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by t ...
-weighted'' index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented.
Municipal bond A municipal bond, commonly known as a muni, is a Bond (finance), bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal ...
s, and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes
Treasury securities United States Treasury securities, also called Treasuries or Treasurys, are government debt instruments issued by the United States Department of the Treasury to finance government spending as an alternative to taxation. Since 2012, U.S. gov ...
, Government agency bonds, Mortgage-backed bonds,
Corporate bond A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business. The term is usually applied to longer-term debt instruments, with maturity of ...
s, and a number of foreign bonds traded in U.S. The Bloomberg US Aggregate Bond Index is an intermediate term index. The weighted average maturity as of July 1, 2022 was 8.76 years.


Investing

Many index funds and exchange-traded funds attempt to replicate (before fees and expenses) the performance of the Bloomberg US Aggregate Bond Index. Some examples of such funds include
iShares iShares is a collection of exchange-traded funds (ETFs) managed by BlackRock, which acquired the brand and business from Barclays in 2009. The first iShares ETFs were known as World Equity Benchmark Shares (WEBS) but have since been rebranded ...
Core US Aggregate Bond Index (AGG),
Thrift Savings Plan The Thrift Savings Plan (TSP) is a defined contribution plan for United States civil service employees and retirees as well as for members of the uniformed services. As of December 31, 2020, TSP has approximately 6.2million participants (of which ...
(F Fund) Fixed Income Index fund,
Vanguard The vanguard (also called the advance guard) is the leading part of an advancing military formation. It has a number of functions, including seeking out the enemy and securing ground in advance of the main force. History The vanguard derives fr ...
Total Bond Market Index Fund (VBMFX), and
Fidelity Fidelity is the quality of faithfulness or loyalty. Its original meaning regarded duty in a broader sense than the related concept of ''fealty''. Both derive from the Latin word ''fidēlis'', meaning "faithful or loyal". In the City of London f ...
U.S. Bond Index Fund
FXNAX
. Fund managers sometimes subdivide the different parts of the Aggregate by maturity or sector for managing individual portfolios. The Municipal section of the index is the only part of the index that cannot be used for this purpose - because municipal debt is issued by so many different entities, the Municipals in the Aggregate are only intended to be representative, and Bloomberg maintains separate indices for maintaining Municipal-only portfolios.


Criticism

Some investors have criticized the use of the Agg as a representation of the performance of the entire US fixed income universe. Because the benchmark was founded in the 1970s, and some of its data dates back to only 1986, a time when
interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
s began to decline from all-time highs, the index has only seen a few years of negative returns. Additionally, approximately one-third of the Agg is US Treasuries, which exposes the index to US monetary policy. The exclusion of high yield, foreign-denominated and municipal bonds, as well as certain mortgage backed securities also limits the index.


See also

*
Index fund An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can a specified basket of underlying investments.Reasonable Investor(s), Boston University Law Review, avail ...
*
Bond market index A bond index or bond market index is a method of measuring the investment performance and characteristics of the bond market. There are numerous indices of differing construction that are designed to measure the aggregate bond market and its vari ...


References

* Richard A. Ferri, ''All About Asset Allocation'', McGraw-Hill, 2006, {{ISBN, 0-07-142958-1


External links


Investopedia

Factsheet-US-Aggregate.pdf

Reuters news article: usa markets index barclays

Bloomberg announcement of acquisition effective Aug 24th 2016
Bond market indices Lehman Brothers Barclays