Bloomberg Barclays Aggregate Bond Index

Bloomberg Barclays Aggregate Bond Index

What is Agg?

The Agg, formerly known as the Bloomberg Barclays Aggregate Bond Index, is an index used by bond traders, mutual funds and ETFs as a benchmark to measure their relative performance.

The index includes government securities, mortgage-backed securities (MBS), asset-backed securities (ABS) and corporate securities to simulate the universe of bonds in the market. The index works similarly for the bond market to what the S&P 500 or Dow Jones Industrial Average (DJIA) index does for the equity market.

The index is generally considered to be the best bond index in the total market, as it is used by more than 90% of investors in the United States. Agg is made up of securities of superior or superior quality, with a maturity of at least one year and with a nominal value in circulation of at least $ 100 million.

courtesy of Bloomberg.

Understanding Agg

History of Agg

The history of the Agg can be traced to previous indices founded by the investment bank Kuhn, Loeb & Co. in 1973. These were two indices: one that followed the universe of government bonds American and the other that followed total corporate bonds.

The most modern version which is first known as the Lehman Aggregate Bond Index was created in 1986 by Lehman Brothers to provide global exposure to the US bond market.

Following the bankruptcy of Lehman Brothers in September 2008, the British bank Barclays Plc purchased the investment banking and capital market activities of Lehman in North America. Following this acquisition, the index was officially renamed Barclays Capital Aggregate Bond Index, which still retained the function and value of the Lehman Aggregate Bond Index.

Key points to remember

  • The Agg is an index that broadly tracks almost the entire US high-quality bond market.
  • Investors looking to invest in securities that roughly mirror the Agg should look to ETFs and mutual funds that follow the index, such as the iShares Barclays Aggregate Bond ETF.

In 2020, thanks to a series of acquisitions, it became the Bloomberg Barclays Bond index, and the co-branding between Bloomberg and Barclays was to last for its first five years.

Composition of the Agg

Also known as “BarCap Aggregate” or “Barclays Agg”, the Barclays Capital Aggregate Bond Index includes approximately $ 15 trillion in bonds and includes the entire space of high-quality domestic fixed income securities traded in the states -United.

It is weighted by market capitalization, which means that the securities represented in the index are weighted by the market size of each type of bond. To be included in the index, bonds must be rated investment grade (at least Baa3 / BBB) by Moody’s and S&P. As a result, the index ended up meaning less “aggregate bonds” and more “higher quality bonds”.

Funds and ETFs following Agg

Investors who want maximum exposure to the fixed income market can buy an exchange traded fund (ETF) or a mutual fund that tracks the index. The largest bond ETF is the iShares Barclays Aggregate Bond ETF (ticker symbol AGG), which had net assets of more than $ 66 billion in November 2019. Investing in the ETF is the most common way for investors to monitor the performance of American investments. quality obligations.

The Vanguard Total Bond Market Index Fund (stock symbol VBMFX), the world’s largest bond mutual fund, also tracks the performance of the Barclays Capital Aggregate Bond Index.

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