What Is the Bloomberg Aggregate Bond Index, Who Tracks the Agg?

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 and the managers of mutual funds and exchange-traded funds (ETFs) as a benchmark to measure their relative performance.

The Agg is to the bond market what the Wilshire 5000 Total Stock Index is to the equity market.

The index has been known as the Bloomberg Agg only since August 2021. It was for many years the Barclays Agg. Bloomberg purchased Barclays fixed-income indexes in 2016 and, for the following five years, labeled them as Bloomberg Barclays indices. All now carry only the Bloomberg name.

Understanding the Bloomberg Aggregate Bond Index

The Bloomberg Aggregate Bond Index is widely considered to be one of the best total bond market indices.

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. It tracks bonds 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. The investment bank created two indices—one that tracked U.S. government bonds and a second that tracked corporate bonds.

Composition of the Bloomberg Aggregate Bond Index

The composition of the Agg index is designed to represent the full range of investment-grade bonds traded in the U.S. It is composed of more than 10,000 issues. U.S. Treasuries represent nearly 40% of the index. The remaining components represent the debt of major industries including real estate, industrial companies, financial institutions, and utilities.

An ETF tied to the Agg will closely mirror this distribution. For example, the iShares AGG ETF holds about 10,000 securities. The composition of the ETF includes (as of Jan. 22, 2022) 39.17% tied to U.S. Treasuries, 10.91% Federal National Mortgage Association, 5.65% Government National Mortgage Association, 5.36% Uniform MBS, and 4.5% Federal Home Loan Mortgage Corporation. The remainder, each making up less than 1%, is in bonds issued by the 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 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 $90 billion as of Jan. 22, 2022.

The Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), with $316.2 billion in assets as of Jan. 22, 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, 3.7% in AAA-rated debt, 3.2% in AA debt, 12.1% in A debt, and 15.5% in BBB debt.