The Bloomberg Aggregate Bond Index, or "the Agg," is a broad-based fixed-income index used by bond traders and managers of mutual funds and exchange-traded funds (ETFs) as a benchmark to measure their relative performance.
This benchmark is so influential that it tracks over $50 trillion worth of fixed-income securities. This behemoth of an index doesn't just reflect the health of the bond market; it serves as a pulse check for the entire U.S. economy. Theindexhas been known as the "Bloomberg Agg" since August 2021. For many years, it was the Barclays Agg and, before that, the Lehman Agg. Bloomberg purchased Barclays' fixed-income indexes in 2016.
Key Takeaways
- The Bloomberg Aggregate Bond Index, or Agg, broadly tracks the performance of the U.S. investment-grade bond market.
- The index is composed of investment-grade government and corporate bonds.
- The iShares Core U.S. Aggregate Bond ETF (AGG) is among the largest and most liquid exchange-traded funds (ETFs) that track the index.
Understanding the Bloomberg Aggregate Bond Index
The Bloomberg Aggregate Bond Index is widely considered to be among the best total bond market indexes. In this way, the Agg is to the bond market what the Wilshire 5000 Total Stock Index is to the equity market. The Agg index includes government Treasury securities, corporate bonds, mortgage-backed securities (MBS), asset-backed securities, and municipal bonds. The Agg index only includes bonds that are of investment-grade quality or better.
By including a broad spectrum of effectively representing the overall performance of the investment-grade bond market. Investors and fund managers use the Agg to gauge their portfolio performance against a comprehensive standard, enabling them to determine how well their investments are performing relative to the broader market.
By following the index, investors can gain insights into interest rate movements, credit risk, and overall market sentiment. For instance, a rising Agg value generally indicates a favorable environment for bonds, featuring declining interest rates, while a declining Agg suggests increasing risk or rising rates. Moreover, the Agg's composition, which includes a significant portion of U.S. Treasurys, reflects changes in U.S. monetary policy and economic conditions.
However, it is essential for investors to recognize that the Agg doesn't include the entire U.S. bond market since it excludes high-yield ("junk") bonds and certain municipal securities, which may limit its effectiveness as a comprehensive market indicator. Despite these limitations, the Agg remains a critical tool for investors who wish to benchmark their fixed-income investments and assess their performance relative to the broader bond market.
The Agg Index's history can be traced to indexes formed by Lipson, Roundtree, Kuhn, Loeb & Co. in 1973. The investment bank created two indexes—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's composed of more than 10,000 issues. U.S. Treasurys represent almost 40% of the index. The remaining components represent the debt of major industries, including real estate, industrial companies, financial institutions, and utilities.
The composition of the Index includes the following (all data here and below is as of the third quarter of 2024):
| The Agg's Top Index Holdings by Weight | |
|---|---|
| Issuer | Percentage |
| U.S. Treasurys | 43.4% |
| Federal National Mortgage Association (Fannie Mae) | 11.5% |
| Government National Mortgage Association (Ginnie Mae) | 7.1% |
| Federal Home Loan Corporation | 5.7% |
| Uniform MBS | 1.8% |
| Bank of America Corp (BAC) | 0.6% |
| JP Morgan Chase (JPM) | 0.6% |
| Morgan Stanley (MS) | 0.4% |
| Wells Fargo (WFC) | 0.4% |
ETFs and Mutual Funds That Track the Agg
Investors looking to gain maximum exposure to the fixed-income market can buy shares in an ETF or a mutual fund that tracks the index.
An ETF tied to the Agg will closely mirror this distribution. For example, the iShares AGG ETF holds about 10,000 securities. In fact, it is the largest bond ETF, with net assets of more than $111 billion, with a low expense ratio of 0.03%.
The Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), with more than $320 billion in assets under management (AUM) and an expense ratio of 0.05%, is among the largest bond mutual funds in the world, tracks the performance of the Bloomberg U.S. Aggregate Float-Adjusted Index. VBLTX has 65.4% of its funds invested in U.S. government debt, 3.7% in AAA-rated debt, 3.2% in AA debt, 12.1% in A debt, and 15.5% in BBB debt.
| Agg ETFs | |||
|---|---|---|---|
| IssuerName | Ticker | AUM ($ Billions) | Expense Ratio (%) |
| iShares | AGG | $111 | 0.03% |
| S&P - SPDR | SPAB | $8.1 | 0.03% |
| Schwab | SCHZ | $7.9 | 0.03% |
| BNY Mellon | BKAG | $1.8 | 0.01% |
| JP Morgan - BetaBuilders | BBAG | $1.5 | 0.03% |
| Agg Mutual Funds | |||
|---|---|---|---|
| Issuer Name | Ticker | AUM ($ Billions) | Expense Ratio (%) |
| Vanguard | VBTLX | $320 | 0.05% |
| Fidelity | FXNAX | $56.7 | 0.025% |
| Schwab | SWAGX | $4.9 | 0.04% |
What Happened to the Barclays Aggregate Bond Index?
In August 2016, Bloomberg L.P. acquired the index as part of a larger purchase of Barclays' index and risk analytics business. After the acquisition, the index was renamed the "Bloomberg Barclays US Aggregate Bond Index," and the Barclays name was dropped in 2021.
Before becoming the Barclays Aggregate Bond Index, it was the Lehman Aggregate Bond Index until November 2008, when Lehman went under and Barclays Bank acquired its assets.
What Is an "Aggregate" Index?
An aggregate index typically includes a broad range of securities within a particular category, such as stocks, bonds, or other financial instruments. The Bloomberg Aggregate Bond Index fits since it includes a wide selection of fixed-income securities from issuers, including the U.S. government, U.S.-government sponsored enterprises, asset-backed securities, and corporate bonds.
When Was the AGG Index First Created?
In 1973, the investment firm Lipson and Roundtree created two total-return indexes focused on U.S. bonds: the US Government Index and the US Investment Grade Corporate Index. These indexes were designed to provide a comprehensive measure of the performance of the US bond market, which was lacking at the time. In 1979, the two indexes were combined, and in 1986, a mortgage-backed securities (MBS) index was added. Lehman Brothers acquired Lipson's research when it bought Kuhn Loeb in 1977. This acquisition included Lipson's work on bond indexes.
The Bottom Line
The Bloomberg Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. Weighted to U.S. Treasurys and government-sponsored securities like Fannie Mae and Ginnie Mae, along with highly rated corporate bonds from blue chip issuers, the index is widely used to measure the health of the broader bond market in the U.S. Investors seeking diversified bond exposure can buy shares of low-cost ETFs or mutual funds that track the index.
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.
Barron's. "'The Agg' Is Getting a New Name Again. Bloomberg Has Bigger Plans for Its Index Business."
Scott D. Stewart et al. “Portfolio Management: Theory and Practice,” Pages 236–238. John Wiley & Sons, 2023.
Bloomberg. "Bloomberg Fixed Income Indices."
iShares. "iShares Core U.S. Aggregate Bond ETF."
Vanguard. "Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), Overview."
Vanguard. "Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), Portfolio."
Bloomberg. "Bloomberg Completes Fixed Income Indices Rebrand."
Bloomberg. "Bloomberg Fixed Income Index Methodology." Pp. 5-7.
Bloomberg. "This Activist Built One of the Foundations of Passive Investing."
Related Terms
A war bond is is a form of government debt that seeks to raise capital from the public to fund war efforts.
more
Payment-In-Kind (PIK) Bonds: Definition and How Interest Works
A payment-in-kind bond is a type of bond that pays interest in additional bonds rather than in cash. PIK bonds are typically issued by companies facing financial distress.
more
Deposit Broker: What It is, How It Works
A deposit broker is a person or company tasked with placing financial deposits at a depository institution on behalf of a third party.
more
Agency Bond: Definition, Types, and Tax Rules
An agency bond is a debt security issued by a federal government department or by a government-sponsored enterprise such as Freddie Mac or Fannie Mae.
more
Industrial Revenue Bonds: What They Are and How They Work
Industrial revenue bonds are municipal debt securities issued by a government agency on behalf of a private sector company and intended to build or acquire factories or tools.
more
Bond Ladder: Overview, Benefits, and Examples
A bond ladder is a portfolio of fixed-income securities with different maturity dates. Read how to use bond ladders to create steady cash flow.
more
Partner Links
- About Us
- Terms of Service
- Dictionary
- Editorial Policy
- Advertise
- News
- Privacy Policy
- Contact Us
- Careers
- #
- A
- B
- C
- D
- E
- F
- G
- H
- I
- J
- K
- L
- M
- N
- O
- P
- Q
- R
- S
- T
- U
- V
- W
- X
- Y
- Z
Investopediais part of the Dotdash Meredithpublishingfamily.
We Care About Your Privacy
We and our 100 partners store and/or access information on a device, such as unique IDs in cookies to process personal data. You may accept or manage your choices by clicking below, including your right to object where legitimate interest is used, or at any time in the privacy policy page. These choices will be signaled to our partners and will not affect browsing data.
We and our partners process data to provide:
Store and/or access information on a device. Use limited data to select advertising. Create profiles for personalised advertising. Use profiles to select personalised advertising. Create profiles to personalise content. Use profiles to select personalised content. Measure advertising performance. Measure content performance. Understand audiences through statistics or combinations of data from different sources. Develop and improve services. Use limited data to select content.
