Bloomberg Barclays US Aggregate Bond Index

The  Bloomberg Barclays US Aggregate Bond Index (ticker: LBUSTRUU), formerly known as the Lehman Aggregate Bond Index and the Barclays US Aggregate Index, was created in 1986 with backdated history going back to 1976. The index has been maintained by Bloomberg L.P. since August 24th 2016. The index is a predominant index benchmark for US bond investors, and is a benchmark index for many US index funds.

Overview
The Index is a composite of four major subindices: US Government Index; US Credit Index; US Mortgage Backed Securities Index (1986); and (beginning in 1992) US Asset Backed Securities Index. The index holds investment quality bonds. The ratings are based on S&P, Moody, and Fitch bond ratings. Table 3 in the appendix provides credit quality breakdowns for the index from 2005-2009. The index does not include high yield bonds, municipal bonds, inflation-indexed bonds, or foreign currency bonds. In 2010, the index held more than 8,200 bond issues. The time line for the addition and subtraction of asset classes, and changes in the minimum issue size and credit quality standards for the index, are included in the time line below.

The current bond asset classes that compose the index:
 * Government: Treasury bills, notes, and bonds, Agency bonds
 * Credit: Industrial, Finance, Utility, Yankee Bonds
 * Mortgage Backed, GNMA, FNMA, FHLMC
 * Asset backed, Credit card receivables, Auto Loans, Home equity loans

The relative weighting of asset classes within the index changes over time as new asset classes are added to the index, as issuance of bonds grows and ebbs, and as market security values fluctuate. The following table shows the index sector allocation over the period 1973-2013. A breakdown of mortgage backed securities (GNMA, FHLMC, FNMA) in the index from 1978-2001 is included in the notes.

In June 2009, as a result of the 2008 financial crisis, Barclay's announced the creation of the US Aggregate Float Adjusted Index that excludes Treasuries, agencies and MBS held in Federal Reserve accounts.

The modified adjusted duration of the U.S. Aggregate index is 5.51 years (as of 30-Aug-2016).

All bonds have a final maturity of at least one year. Subindices based on intermediate maturity bands range from 1 to 9.999 years; long maturity bands include maturity bands of 10 years or greater.

Milestones in the evolution of the index
Source: [ Lehman Brothers: a Guide to the Lehman Global Family of Fixed Income Indices] Figure 7.; US Aggregate Index Factsheet


 * 1/73 Inception date for Government/Corporate Index.
 * 1/86 Introduction date for the Mortgage-Backed, Yankee, and Aggregate Indices, with returns and statistics calculated back to 12/31/75.
 * 8/88 Liquidity constraint increased from $1 million to $25 million for corporate issues. Yankee Index absorbed into the Government/Corporate Index.
 * 1/89 Published durations changed from Macaulay duration to maturity to duration to worst. Published yields changed from yield to maturity to yield to worst.
 * 1/90 Liquidity constraint increased from $25 million to $100 million for government issues. Yankee sector absorbed into the Corporate Index. Title XI issues dropped from the Government Index. Asset-backed bullet issues added to the finance sector.
 * 1/92 Asset-Backed Securities Index added to Aggregate Index. Balloon issues added to MBS Index. Liquidity constraint increased from $25 million to $50 million for nongovernment issues. Mobile homes dropped from MBS Index.
 * 1/94 Liquidity constraint increased from $50 million to $100 million for all issues.
 * 1/95 GPMs dropped from the MBS Index. Average coupons par-weighted instead of market-weighted.
 * 12/97 Added stranded cost securities to the Asset-Backed Securities Index.
 * 12/98 Manufactured housing securities added to the ABS Index. Quarter-coupons dropped from MBS Index. All World Bank Issues moved to supranational component of Corporate Index.
 * 7/99 Liquidity constraint raised to $150 million from $100 million. ERISA-eligible CMBS added to the Aggregate Index.
 * 7/00 Renamed Corporate Index to Credit. Absorbed all Yankee Corporates into their respective industry classifications. Changed the liquidity constraint on the ABS Index—old constraint: $150 million per tranche; new constraint: deal must be $500 million, tranche must be $25 million. ERISA-eligible B pieces to be included also.
 * 10/03 Liquidity constraint raised to USD200mn from USD150mn. Started using the most conservative rating of Moody’s and S&P to determine index eligibility instead of Moody’s only for split-rated securities.
 * 7/04 Liquidity constraint raised to USD250mn/USD25mn CMBS tranche size from USD 200mn.
 * 7/05 Fitch ratings added to Moody’s and S&P to determine index eligibility and classification.
 * 4/07 Agency Hybrid Adjustable Rate Mortgage (ARM) securities added to the index, but not eligible for the Global Aggregate.
 * 1/08 U.S. MBS Fixed-Rate Balloons and U.S. ABS Manufactured Housing removed.
 * 11/08 Index rebranded as Barclays Capital U.S. Aggregate Index.
 * 10/09 U.S. ABS Home Equity Loans removed.
 * 01/11 Covered bonds become eligible, A1A tranches are removed from the CMBS portion of the index.
 * 05/12 Issuer eligibility for fixed-rate ABS no longer based on a predefined list of “eligible” issuers.
 * 04/13 Loan participation notes (LPNs) eligible for the index.
 * 04/14 Minimum liquidity for US MBS Index constituents raised from USD250mn to USD1bn.
 * 07/14 US Agency CMBS added to the index.

Credit quality
The table below shows the annual distribution of credit quality holdings in the index. All four designations (AAA to Baa} are considered investment quality, with specific distinctions:
 * Aaa rating: highest quality
 * Aa rating: high quality
 * A rating: strong
 * Baa rating: medium grade

Index returns
The following expandable table provides return data for the index. The annual returns of the index from 1976 to date have ranged between -2.92% in 1994 to 32.60% in 1982.

Index funds
The Bloomberg Barclays US Aggregate Bond Index was formulated as a market benchmark and contains thousands of illiquid bonds. Index fund managers therefore use sampling strategies when attempting to construct index funds tracking the index. Bond holdings range from approximately 800 to 1600 bonds for SPDR and Ishares  ETFs; and from approximately 930 bonds (TRowePrice) to 5200 bonds (Vanguard) for bond index mutual funds. The Vanguard Bond Market ETF is a share class of the Vanguard bond market index fund.