Bloomberg Aggregate Bond Index

What Is the Bloomberg Aggregate Bond Index?

The Bloomberg Aggregate Bond Index or "the Agg" is a broad-based fixed-income index used by bond traders, mutual funds, and ETFs as a benchmark to measure their relative performance. The index includes government Treasury securities, corporate bonds, mortgage-backed securities (MBS), asset-backed securities (ABS), and munis to simulate the universe of bonds in the market. The index functions in a similar manner for the bond market to what the Wilshire 5000 Total Stock Index does for the equity market.

Key Takeaways

  • The Bloomberg Aggregate Bond Index or "the Agg" is an index that broadly tracks the U.S. investment-grade bond market.
  • The index is composed of a range of securities from corporate bonds and Treasuries to asset-backed securities, with the iShares Barclays Aggregate Bond ETF (AGG) being one of the key exchange-traded funds tracking the index.
  • The iShares AGG ETF has almost 40% of its portfolio invested in U.S. Treasuries and is one of the most common ways for investors to track U.S. investment-grade bonds.
  • The Vanguard Total Bond Market Index Fund (VBTLX), on the other hand, is a mutual fund that tracks the U.S. bond market, with over 65% of its funds invested in U.S. Government debt.

Understanding the Bloomberg Aggregate Bond Index

The Bloomberg Aggregate Bond Index is broadly considered to be one of best total bond market indices. The Agg consists of securities that are of investment-grade quality or better. The Agg's history can be traced to earlier indices founded by the Kuhn, Loeb & Co. investment bank in 1973. Theirs were two indices—one that tracked the universe of U.S. government bonds, and one that tracked total corporate bonds.

Composition of the Bloomberg Aggregate Bond Index

Based on the iShares Barclays Aggregate Bond ETF (AGG), the composition of the Agg index is meant to offer broad exposure to U.S. investment-grade bonds. The iShares AGG ETF holds almost 10,000 securities.. The composition of the ETF includes (as of Jan. 6, 2022) 39.1% tied to U.S. Treasuries, 10.7% Federal National Mortgage Association, 5.8% uniform MBS, 5.8% Government National Mortgage Association, 4.5% Federal Home Loan Mortgage Corporation—the rest, all making up less than 1% each, are tied to Federal Home Loan Mortgage Corporation Gold, Bank of America, JPMorgan Chase, Morgan Stanley, and Goldman Sachs.

Funds and ETFs That Track the Agg

Investors looking to gain maximum exposure to the fixed income market can purchase an exchange traded fund (ETF) or a mutual fund that tracks the index. The largest bond ETF is the iShares Core U.S. Aggregate Bond ETF, which has net assets of more than $92 billion, as of Jan. 11, 2022. Investing in the ETF is the most common way investors use to track the performance of U.S. investment-grade bonds.

The Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), with $316.2 billion in assets as of Jan. 11, 2022, among the largest bond mutual funds in the world, tracks the performance of the Bloomberg U.S. Aggregate Float Adjusted Index. The Vanguard Total Bond Market Index Fund has 65.4% of its funds invested in U.S. Government debt, 3.8% in AAA-rated debt, 3.2% in AA debt, 12.1% in A debt, and 15.5% in BBB debt.

Article Sources

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  1. Bloomberg. "Bloomberg Fixed Income Indices." Accessed Jan. 11, 2022.

  2. iShares. "iShares Core U.S. Aggregate Bond ETF." Accessed Jan. 11, 2022.

  3. Yahoo! Finance. "iShares Core U.S. Aggregate Bond ETF (AGG)." Accessed Jan. 11, 2022.

  4. Yahoo! Finance. "Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)." Accessed Jan. 11, 2022.

  5. Vanguard. "Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)." Accessed Jan. 11, 2022.