Barclays US Aggregate Bond Index

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The Barclays US Aggregate Bond Index (ticker: LBUSTRUU), formerly the Lehman Aggregate Bond Index, was created in 1986 with backdated history going back to 1976. The index is a predominate 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 subindexes: 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. [1] The time line for the addition and subtraction of asset classes, as well as changes in the minimum issue size and credit quality standards for the index are included in the time line sidebar.

Milestones in the Evolution of the Barclays U.S. Aggregate Index
  • 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.
-- Lehman Brothers: a Guide to the Lehman Global Family of Fixed Income Indices Figure 7.; US Aggregate Index Factsheet


The current bond asset classes comprise the index: [2]

  1. Government
    1. Treasury bills, notes, and bonds
    2. Agency bonds
  2. Credit
    1. Industrial
    2. Finance
    3. Utility
    4. Yankee Bonds
  3. Mortgage Backed
    1. GNMA
    2. FNMA
    3. FHLMC
  4. Asset backed
    1. Credit card receivables
    2. Auto Loans
    3. 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.[3]

Table. Barclays US Aggregate Bond Index Sector Allocation
Trailing 5 years[4] [5]
Year Government Corporate Mortgage Backed Asset Backed
1973 49.0% 51.0% 0.0% 0.0%
1983 59.0% 24.0% 17.0% 0.0%
1993 53.0% 17.0% 28.0% 2.0%
1998 46.0% 22.0% 31.0% 1.0%
1999 42.0% 21.0% 34.0% 2.0%
2000 38.0% 24.0% 35.0% 4.0%
2001 34.0% 27.0% 35.0% 4.0%
2005 40.2% 19.5% 34.9% 5.3%
2006 39.4% 19.4% 35.1% 6.1%
2007 35.4% 19.6% 38.6% 6.5%
2008 38.6% 17.7% 39.6% 4.1%
2009 40.8% 18.8% 36.8% 3.6%
2010 45.8% 18.8% 32.7% 2.8%
2011 46.0% 19.9% 34.1% -
2012 46.7% 21.5% 31.8% -
2013 45.7% 22.3% 32.0% -
2014 45.3% 23.3% 31.4% -
2015 45.8% 24.2% 31.0% -
2016 44.7% 25.4% 30.0% -

The modified adjusted duration of the U.S. Aggregate index is 5.51 years (as of 30-Aug-2016).[6]

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.[7]

Credit quality

The table below shows the annual distribution of credit quality holdings in the index.[note 1] 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
Table Barclays US Aggregate Bond Index Credit Quality
Trailing 5 years[8]
Year Aaa Aa A Baa
2005 78.6% 4.7% 8.8% 7.8%
2006 78.9% 5.0% 8.7% 7.5%
2007 79.2% 5.4% 8.2% 7.2%
2008 80.9% 3.1% 9.3% 6.7%
2009 78.1% 4.1% 9.7% 8.1%
2010 77.7% 4.5% 9.7% 8.1%
2011 75.1% 5.1% 10.7% 9.1%
2012 73.1% 5.1% 11.0% 10.8%
2013 72.4% 4.9% 11.1% 11.6%
2014 71.8% 4.6% 11.8% 11.9%
2015 71.5% 4.4% 11.4% 12.7%
2016 70.8% 4.4% 11.3% 13.5%

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.

Table.Annual Returns [9][10]
Year Total Return
1976 15.60%
1977 3.00%
1978 1.40%
1979 1.90%
1980 2.70%
1981 6.30%
1982 32.60%
1983 8.40%
1984 15.15%
1985 22.11%
1986 15.26%
1987 2.76%
1988 7.89%
1989 14.53%
1990 8.96%
1991 16.00%
1992 7.40%
1993 9.75%
1994 -2.92%
1995 18.47%
1996 3.63%
1997 9.65%
1998 8.69%
1999 -0.82%
2000 11.63%
2001 8.44%
2002 10.26%
2003 4.10%
2004 4.34%
2005 2.43%
2006 4.33%
2007 6.97%
2008 5.24%
2009 5.93%
2010 6.54%
2011 7.84%
2012 4.21%
2013 -2.02%
2014 5.97%

Index funds

The 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.

Index funds tracking Barclays US Aggregate Bond Index
Fund Link ETF Link
Dreyfus Bond Market Index Fund DBMIX Ishares Barclays Aggregate Bond ETF AGG
T Rowe Price US Bond Index Fund PBDIX SPDR Barclays Aggregate Bond ETFE BNDS
TIAA-CREF Bond Index TRILX Vanguard Total Bond Market ETF(Float-Adjusted BND
Vanguard Total Bond Market Index Fund](Float-Adjusted) VBTLX


Notes

  1. Breakdown of mortgage backed securities in the index.
    Table. Barclays US Aggregate Bond Index Mortgage Backed Securities 2010 forward
    Year GNMA FHLMC FNMA
    2013 26.7% 26.9% 40.6%
    2012 25.7% 22.9% 46.5%
    2011 23.5% 30.3% 46.2%
    2010 20.4% 32.2% 47.4%

    from Barclays bond index guides

    Table Barclays US Aggregate Bond Index Mortgage Backed Securities 1978 - 2001
    Year GNMA FHLMC FNMA
    1978 89% 11% 0%
    1983 69% 22% 9%
    1988 50% 30% 20%
    1993 32% 33% 35%
    1998 26% 34% 40%
    1999 25% 34% 41%
    2000 24% 34% 42%
    2001 21% 35% 44%

    from Lehman Brothers: a Guide to the Lehman Global Family of Fixed Income Indices 1973-2001

References

External links