Best Index to follow Global Bond Market

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spdoublebass
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Best Index to follow Global Bond Market

Post by spdoublebass » Wed Jan 17, 2018 2:36 pm

I want to know what bond index is the best to track the Global Bond market in a general sense. I say general because I know each index excludes certain bonds.

Through reading this forum I have come across a few ways of following this market.

One way is through William Sharpe's Market Portfolio. In RISMAT he states he uses the Citi USBig and Citi WORLDBig indices.

Another person posted that they use the JP Morgan Guide to the Markets
https://am.jpmorgan.com/us/en/asset-man ... DQodApEA_w

Another option could be to look at Vanguards Global Bond Index fund that is not available to US investors. https://americas.vanguard.com/instituti ... tfoliodata


What I'm interested in is the relationships between US and Foreign bonds and also the relationship between foreign bonds and EM bonds.

What I'm finding is that Sharpe's concept is similar to Vanguards Global Bond index in that these relationships are close, including around a 3.8% portion in EM bonds.
It looks like: US 58%, INT 42% (3.8% of the 42% in EM Bonds)

When you use the JP Morgan data, you end up with slightly more heavy in Foreign bonds and especially more in EM bonds.
Something around US 37.4%, INT 42.5%, EM Bonds 20.1%


I know these discrepancies come from the differences of what bonds are in their respective indexes. For example Citi USBig contains MBS bonds, while Citi WORLDBig does not.

How does one go about finding a generic overall world bond market index? My gut tells me to just rely on the Vanguard one which tracks the Barclay's Global Agg.
I'm just curious how big these markets are.

I know that these markets can get extremely complicated when you start adding in every type of bond....Junk...HY...Tips.... That's why I asked what is a generally acceptable index to use. I feel like I'm missing a piece to the puzzle.

This is only out of curiosity. I am not advocating anyone invest this way. Bonds are tricky in general for me so I was checking out different indexes. I'm not here to debate anything. As always thanks in advance.
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Alexa9
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Re: Best Index to follow Global Bond Market

Post by Alexa9 » Wed Jan 17, 2018 2:39 pm

With equities, ETF: VT (Global Market) covers VTI (Total US) and VXUS (Total Int).
I am not sure about bonds, BND (US) and BNDX (Int) are good enough for me.
I think even just US Stocks and Bonds are "good enough" for most people.

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spdoublebass
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Re: Best Index to follow Global Bond Market

Post by spdoublebass » Wed Jan 17, 2018 2:50 pm

Alexa9 wrote:
Wed Jan 17, 2018 2:39 pm
With equities, ETF: VT (Global Market) covers VTI (Total US) and VXUS (Total Int).
I am not sure about bonds, BND (US) and BNDX (Int) are good enough for me.
I think even just US Stocks and Bonds are "good enough" for most people.
Thanks for the reply. As I stated in the OP, I’m not talking about investing this way. I’m interested in which Index best follows the global bond market for reference purposes.
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asset_chaos
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Re: Best Index to follow Global Bond Market

Post by asset_chaos » Wed Jan 17, 2018 3:22 pm

The difference in amounts of emerging market government debt weighting in an index like Citi WBIG and in a fund like Vanguard's global bond is probably because the WBIG index tries to be all inclusive, while the fund follows an index for investment grade bonds only. The smaller amount of emerging market debt in the fund is because only a few emerging market governments have investment grade ratings.
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spdoublebass
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Re: Best Index to follow Global Bond Market

Post by spdoublebass » Thu Jan 18, 2018 12:03 pm

asset_chaos wrote:
Wed Jan 17, 2018 3:22 pm
The difference in amounts of emerging market government debt weighting in an index like Citi WBIG and in a fund like Vanguard's global bond is probably because the WBIG index tries to be all inclusive, while the fund follows an index for investment grade bonds only. The smaller amount of emerging market debt in the fund is because only a few emerging market governments have investment grade ratings.
Yeah, it seems like you are right. It comes down to investment grade.
Does EM Gov verse EM corporate alter the investment grade? or is the grade only based on region and economy of the country?
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azanon
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Re: Best Index to follow Global Bond Market

Post by azanon » Thu Jan 18, 2018 12:44 pm

Are you wanting a currency hedged or unhedged Global Bond Market index? Most global stock indexes I've see don't hedge the foreign currencies for the foreign securities.

Valuethinker
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Re: Best Index to follow Global Bond Market

Post by Valuethinker » Thu Jan 18, 2018 12:59 pm

spdoublebass wrote:
Thu Jan 18, 2018 12:03 pm
asset_chaos wrote:
Wed Jan 17, 2018 3:22 pm
The difference in amounts of emerging market government debt weighting in an index like Citi WBIG and in a fund like Vanguard's global bond is probably because the WBIG index tries to be all inclusive, while the fund follows an index for investment grade bonds only. The smaller amount of emerging market debt in the fund is because only a few emerging market governments have investment grade ratings.
Yeah, it seems like you are right. It comes down to investment grade.
Does EM Gov verse EM corporate alter the investment grade? or is the grade only based on region and economy of the country?
there's a debate in the rating agencies themselves whether a corporate can have a higher credit rating than its respective sovereign government.

Not sure how that one has been worked out.

EM corporate bonds is a fairly new market. I don't think there was much in issue until recent years.

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spdoublebass
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Re: Best Index to follow Global Bond Market

Post by spdoublebass » Fri Jan 19, 2018 3:06 pm

Valuethinker wrote:
Thu Jan 18, 2018 12:59 pm

there's a debate in the rating agencies themselves whether a corporate can have a higher credit rating than its respective sovereign government.

Not sure how that one has been worked out.

EM corporate bonds is a fairly new market. I don't think there was much in issue until recent years.
Yeah, I think you are correct. The JP Morgan Guide to the Markets is looking at everything (US, INT, EM) and that's why they get more EM Debt.

The Citi indexes (found on the Yieldbook website) seem to only count investment grade. Which I guess BBB and higher.

I looked at some EM bond funds, but it's harder to find what percent is GOV and what percent is corporate. Even with Vanguards International Bond Fund, it doesn't tell you the breakdown, only says Foreign. When I check on Morningstar the breakdown of BNDX (ETF, Vanguards Int Bond) I was surprised to see it listed as only 12.72% in Corporates and 75% in Government. I had assumed it would be more of an equal split. Maybe I'm just not thinking straight though because TBM is only 27% corporate.

Anyway, Thanks for the info. Again, I just am reading about bonds and had no idea how huge the market value is for them.
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Re: Best Index to follow Global Bond Market

Post by AlohaJoe » Tue May 22, 2018 8:40 pm

spdoublebass wrote:
Wed Jan 17, 2018 2:36 pm
I want to know what bond index is the best to track the Global Bond market in a general sense. I say general because I know each index excludes certain bonds.

Through reading this forum I have come across a few ways of following this market.

One way is through William Sharpe's Market Portfolio. In RISMAT he states he uses the Citi USBig and Citi WORLDBig indices.

Another person posted that they use the JP Morgan Guide to the Markets
https://am.jpmorgan.com/us/en/asset-man ... DQodApEA_w

Another option could be to look at Vanguards Global Bond Index fund that is not available to US investors. https://americas.vanguard.com/instituti ... tfoliodata
The Vanguard Global Bond Index will soon be available to US investors -- https://advisors.vanguard.com/VGApp/iip ... 33776&st=S -- so if you're not in a rush, you can wait for that.

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spdoublebass
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Re: Best Index to follow Global Bond Market

Post by spdoublebass » Tue May 22, 2018 11:48 pm

AlohaJoe wrote:
Tue May 22, 2018 8:40 pm
spdoublebass wrote:
Wed Jan 17, 2018 2:36 pm
I want to know what bond index is the best to track the Global Bond market in a general sense. I say general because I know each index excludes certain bonds.

Through reading this forum I have come across a few ways of following this market.

One way is through William Sharpe's Market Portfolio. In RISMAT he states he uses the Citi USBig and Citi WORLDBig indices.

Another person posted that they use the JP Morgan Guide to the Markets
https://am.jpmorgan.com/us/en/asset-man ... DQodApEA_w

Another option could be to look at Vanguards Global Bond Index fund that is not available to US investors. https://americas.vanguard.com/instituti ... tfoliodata
The Vanguard Global Bond Index will soon be available to US investors -- https://advisors.vanguard.com/VGApp/iip ... 33776&st=S -- so if you're not in a rush, you can wait for that.
Thanks for this info.

I've seen this new ETF has been mentioned a few times on this forum.

I do plan on using it.

I really enjoy starting from Global Market weight and then going from there.
Resist much, obey little.

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