Bloomberg US Aggregate Bond Index
The Bloomberg US Aggregate Bond Index, commonly known as the "Agg," is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market in the United States.[1] It includes a diverse range of securities such as US Treasuries, government-related bonds, corporate debt, and securitized products like mortgage-backed securities (MBS), asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS).[1] The index is market-capitalization weighted, with eligibility criteria requiring securities to have at least one year to maturity, investment-grade ratings (Baa3/BBB- or higher from Moody's, S&P, or Fitch), and minimum liquidity thresholds, such as $300 million outstanding for Treasuries and corporates or $1 billion for MBS.[1] Originally launched in 1986 by Lehman Brothers as the Lehman Aggregate Bond Index, with historical data backfilled to January 1, 1976, it evolved through ownership changes reflecting the financial industry's shifts.[1] Following the 2008 acquisition of Lehman's index business by Barclays, it became the Barclays Capital Aggregate Bond Index until August 2016, when Bloomberg L.P. purchased Barclays' index and risk analytics division for approximately $790 million, initially rebranding it as the Bloomberg Barclays US Aggregate Bond Index.[2] In September 2021, Bloomberg dropped the "Barclays" name, simplifying it to the Bloomberg US Aggregate Bond Index to align with its independent branding.[3] As one of the most widely used benchmarks for fixed-income investors, the Agg serves as a primary reference for evaluating the performance of US investment-grade bond portfolios and funds, representing a market value of approximately $29 trillion in outstanding securities (as of mid-2025).[2] It is tracked by numerous exchange-traded funds (ETFs) and mutual funds, such as the iShares Core US Aggregate Bond ETF (AGG) and the Vanguard Total Bond Market Index Fund (VBTLX), which together manage hundreds of billions in assets.[2] The index's sector allocation typically features Treasuries at around 40-45%, MBS at 25-30%, corporates at 25-30%, and smaller portions in government-related and other securitized assets, providing a comprehensive snapshot of the US taxable bond universe while excluding high-yield, floating-rate, or tax-exempt securities.[4] Rebalanced monthly on the last business day, it remains a cornerstone for institutional and retail investors seeking broad exposure to low-risk, fixed-income returns.[1]Overview
Definition and Purpose
The Bloomberg US Aggregate Bond Index is a broad-based, market capitalization-weighted benchmark that measures the performance of the investment-grade, USD-denominated, fixed-rate taxable bond market, encompassing securities with at least one year to final maturity.[1] It includes key components such as U.S. Treasuries, government-related and corporate bonds, agency mortgage-backed securities, asset-backed securities, and commercial mortgage-backed securities.[1] The index's primary purpose is to provide a standardized reference for assessing fixed-income portfolio performance, conducting risk analysis, and underpinning the creation of investment products like exchange-traded funds (ETFs) that replicate bond market exposure.[5] By offering a comprehensive view of the U.S. investment-grade bond sector, it enables investors to gauge relative returns, manage duration and credit risks, and align strategies with broader market dynamics.[5] Tracing its roots to 1973, when the predecessor indices introduced the concept of total return measurement for U.S. bonds, the Bloomberg US Aggregate Bond Index was formally established in 1986 with historical data backfilled to January 1, 1976, solidifying its role as a proxy for the overall U.S. bond market.[6][1] This evolution marked it as the first widely adopted total return bond index, setting the standard for transparent, rules-based fixed-income benchmarking.[6] As of 2025, the index continues to anchor institutional and retail investment approaches, supporting diversification across fixed-income assets and steady income generation amid varying interest rate environments, with the tracked market exceeding $29 trillion in value and over $1 trillion in ETF assets benchmarked to Bloomberg fixed-income indices.[7][5]Key Features
The Bloomberg US Aggregate Bond Index employs a market value-weighting method, utilizing beginning-of-month values calculated as the price plus accrued interest multiplied by the outstanding amount.[8] This approach ensures that the index reflects the relative size and liquidity of constituent securities within the eligible universe.[9] The index calculates total returns by incorporating price changes, coupon payments, paydowns, and reinvestment assumptions, where intra-month cash flows from interest and principal contribute to monthly returns but are not reinvested at a short-term rate between rebalance dates.[8] Index levels are updated daily, with monthly rebalancing taking effect on the last business day of the month to adjust the composition of the returns universe.[8] Eligibility for inclusion requires securities to be investment-grade rated.[1] Key exclusions encompass tax-exempt municipal securities, high-yield bonds, inflation-protected securities, and private placements, thereby focusing the index on taxable, fixed-rate investment-grade debt.[8] To account for institutional holdings, the index applies float adjustments by deducting U.S. Treasuries held in the Federal Reserve's System Open Market Account (SOMA) from the total amount outstanding, with these adjustments updated weekly in the projected universe and monthly in the returns universe.[8] Defaulted securities are treated as having zero weight, with accrued interest set to zero and negative coupon returns reflected until their removal at month-end.[9]History
Origins and Early Development
The Bloomberg US Aggregate Bond Index traces its origins to July 7, 1973, when Art Lipson and John Roundtree, analysts at the investment bank Kuhn, Loeb & Co., created the first total return bond index.[2][10] This pioneering effort addressed the growing need for a reliable benchmark to measure bond performance amid the rise of asset allocation strategies in the 1970s, initially comprising two separate indexes: the US Government Index and the US Investment Grade Corporate Index.[11] These indexes focused on investment-grade securities, providing total return calculations that accounted for both interest payments and price changes, a novel approach at the time enabled by advancing computational capabilities.[9] In 1977, Kuhn, Loeb & Co. was acquired by Lehman Brothers, bringing the nascent indexes under new management and setting the stage for further integration.[9] By 1979, Lehman Brothers blended the US Government and US Investment Grade Corporate Indexes into a unified Government/Credit Index, marking an early methodological advancement toward a more comprehensive representation of the US investment-grade bond market.[10] This merger adopted a market value-weighted approach, emphasizing liquidity and scale while establishing basic eligibility rules such as minimum issuance amounts and maturity thresholds to ensure the index reflected tradable securities.[9] A pivotal expansion occurred in 1986 with the inclusion of mortgage-backed securities (MBS), which broadened the index's scope to capture a larger portion of the fixed-income universe.[10] This addition, combined with the prior government and corporate components, led to the renaming as the Lehman Brothers US Aggregate Index, with historical data backfilled to 1976 for continuity.[2] The updated methodology refined the unification of these elements into a single aggregate measure, prioritizing investment-grade, USD-denominated, fixed-rate taxable bonds to serve as a foundational benchmark for portfolio evaluation.[9]Ownership Transitions and Renaming
In the wake of the 2008 financial crisis, Lehman Brothers filed for bankruptcy on September 15, 2008, leading to the acquisition of its index business, including the Lehman Aggregate Bond Index, by Barclays Capital.[2] This transaction resulted in the index being renamed the Barclays Capital Aggregate Bond Index effective November 3, 2008, maintaining its role as a key benchmark for U.S. investment-grade bonds while integrating into Barclays' broader fixed-income offerings. On August 24, 2016, Bloomberg L.P. completed the acquisition of Barclays' Risk Analytics and Index Solutions business, which encompassed the index division, for approximately £615 million (equivalent to about $790 million at the time).[12] The deal, initially announced in December 2015, led to the rebranding of the benchmark as the Bloomberg Barclays US Aggregate Bond Index, reflecting Bloomberg's growing dominance in financial data and analytics while preserving the index's historical continuity dating back to 1973.[13][14] To streamline its branding amid expanding index portfolios, Bloomberg fully rebranded the index as the Bloomberg US Aggregate Bond Index in August 2021, dropping the "Barclays" reference five years after the acquisition.[15] This change emphasized Bloomberg's sole ownership and operational control, with no alterations to the index's underlying methodology or composition.[10] In 2025, Bloomberg continued evolving its fixed-income index ecosystem through updates documented in the Bloomberg Fixed Income Index Methodology released on July 21, which incorporated details on the newly launched European and Global Leveraged Loan Indices as part of the broader classification system.[16] Concurrently, a two-day lockout period for index membership changes was implemented effective July 29, 2025, applying to the August 2025 returns universe across flagship indices including the Bloomberg US Aggregate Bond Index to enhance stability during month-end rebalancing.[16] These adjustments, while not altering core eligibility for the U.S. Aggregate, supported Bloomberg's ongoing refinements to its index governance under its ownership.[17]Methodology
Eligibility Criteria
The Bloomberg US Aggregate Bond Index includes only securities that meet specific eligibility rules designed to ensure a focus on liquid, investment-grade fixed-income instruments accessible to U.S. investors.[16] All eligible bonds must be denominated in U.S. dollars (USD), reflecting the index's emphasis on the domestic U.S. fixed-income market.[16] Credit quality is restricted to investment-grade securities, defined as those rated Baa3 or higher by Moody's, BBB- or higher by S&P, or BBB- or higher by Fitch, using the middle rating when all three are available, the lower of two if only two exist, or the single rating otherwise.[16] To promote liquidity, bonds must have a minimum amount outstanding of at least USD 300 million for government, credit, and covered bonds, while fixed-rate, TBA-deliverable mortgage-backed securities (MBS) vintage cohorts require USD 1 billion; for asset-backed securities (ABS) and commercial MBS (CMBS), the original deal size must be at least USD 500 million with a minimum tranche size of USD 25 million, and CMBS deals need USD 300 million currently outstanding.[16] Maturity requirements stipulate at least one year remaining to final maturity, excluding any securities with less than one year left.[16] Eligible sectors encompass publicly issued U.S. Treasuries, government-related debt, investment-grade corporate bonds, securitized products including agency MBS pass-throughs from Fannie Mae, Freddie Mac, and Ginnie Mae as well as ABS and CMBS, and taxable municipal bonds such as Build America Bonds with federal subsidy.[16] Additional rules mandate that securities be SEC-registered, exempt from registration, or issued under Rule 144A with registration rights, thereby excluding private placements without such rights, retail bonds, private-label MBS, structured notes, floating-rate ABS, high-yield issues, tax-exempt securities, and qualified dividend income (QDI)-eligible securities.[16]Calculation and Rebalancing
The Bloomberg US Aggregate Bond Index employs a total return calculation methodology that aggregates the performance of eligible securities on a daily basis, reflecting changes in market value while incorporating income components. The index level is computed as the previous day's level multiplied by (1 + the weighted sum of individual security returns), where each security's return comprises the price return, coupon income, and paydown proceeds (for amortizing securities like mortgage-backed securities).[16] This approach assumes reinvestment of coupon payments and paydown proceeds at the prevailing index yield to capture the compounded effect of income generation.[16] Specifically, the price return is derived from the change in clean price adjusted for accrued interest, the coupon return accounts for interest payments received during the period, and the paydown return reflects principal repayments valued at the ending price.[16] Securities are weighted by their market value within the index, calculated as the product of the clean price plus accrued interest, multiplied by the amount outstanding, divided by the total market value of the index universe.[16] This formula ensures capitalization-weighted representation, with float adjustments applied to exclude holdings by major central banks such as the Federal Reserve, thereby reflecting only investable supply.[16] For instance, U.S. Treasury amounts outstanding are adjusted daily in the projected universe to subtract Federal Reserve purchases reported via the System Open Market Account (SOMA).[16] The index undergoes monthly rebalancing to update its composition and weights, with the effective date set as the last business day of each month using the U.S. business calendar.[16] The returns universe, which determines the static composition for the upcoming month, is finalized two business days prior to the effective date—a process updated effective July 29, 2025, to align with enhanced transparency in universe determination.[16] Throughout the month, a projected universe is updated daily to incorporate potential eligibility changes, such as new issuances or rating adjustments, before locking in at rebalance.[16] Pricing for index calculation relies on Bloomberg Valuation (BVAL), captured at the 4 p.m. New York time snap, as updated on April 26, 2023, to standardize end-of-day evaluations across fixed income benchmarks.[18] This snap uses bid-side pricing for most securities, with cross-verification against third-party sources during normal market conditions; offer-side pricing applies to new corporate issues in their initial month.[16] Settlement conventions assume T+1 calendar days for most components, except U.S. mortgage-backed securities (MBS), which use T+0 same-day settlement for analytical purposes.[16] New issues meeting eligibility criteria are incorporated into the projected universe upon issuance and settlement, initially weighted based on their offer price to reflect primary market pricing.[16] For corporate bonds issued under Rule 144A, the weighting combines the amounts outstanding of both 144A and Regulation S (Reg-S) tranches to avoid double-counting, using the 144A tranche as the representative amount.[1] Subsequent months shift to bid-side pricing, ensuring alignment with secondary market valuations.[16]Composition and Characteristics
Sector Allocation
The Bloomberg US Aggregate Bond Index's sector allocation reflects its broad coverage of the U.S. investment-grade fixed-income market, with weights determined by market capitalization based on outstanding par value. As of September 30, 2025, the index's composition is dominated by U.S. Treasuries at approximately 46.2%, followed by mortgage-backed securities (MBS) at 24.3%, and investment-grade corporate bonds at 23.9%. Other sectors include non-corporate securities (such as supranationals) at 3.7%, commercial mortgage-backed securities (CMBS) at 1.5%, and agency bonds at 0.5%.[4] Within the Treasury sector, the allocation encompasses U.S. Treasury notes (maturities of 1-10 years), bonds (maturities over 10 years), and Separate Trading of Registered Interest and Principal of Securities (STRIPS), which are zero-coupon instruments created by stripping the principal and interest components of Treasury securities. The MBS sector is primarily composed of agency pass-through securities guaranteed by the Federal National Mortgage Association (Fannie Mae, approximately 39%), Federal Home Loan Mortgage Corporation (Freddie Mac, approximately 33%), and Government National Mortgage Association (Ginnie Mae, approximately 28%), reflecting their significant share in the overall agency MBS market tracked by the index.[1][19] Corporate bonds in the index are segmented by industry, with industrials comprising about 13.6%, financials 7.9%, and utilities 2.4% of the total index weight as of September 30, 2025; these issuers represent a diverse range of U.S.-based and eligible foreign entities within the investment-grade category. The index also incorporates USD-denominated bonds issued by foreign sovereigns, supranationals, and corporations available to U.S. investors, which are classified under government-related or corporate sectors, contributing modestly to the overall diversification without altering the primary U.S.-centric focus.[4][1] Over time, the sector allocation has shifted notably, with Treasury exposure increasing from around 24% in 2004 to over 45% by mid-2025, driven by expanded U.S. government debt issuance. Corporate exposure has seen a long-term rise from lower levels in the index's early years (post-1976 inception) to stabilize near 25% in recent decades, though it has remained relatively unchanged since 2015 amid competing growth in Treasuries. MBS allocation has declined modestly by about 4 percentage points over the past decade. These dynamics have been influenced by Federal Reserve quantitative easing programs, which boosted Treasury and MBS supply; while the standard index uses total outstanding par values without adjustment, a float-adjusted variant excludes Federal Reserve holdings to better reflect investable supply, mitigating QE distortions in benchmark performance.[20][21][22]| Sector | Approximate Weight (%) as of Sep 30, 2025 |
|---|---|
| U.S. Treasuries | 46.2 |
| Mortgage-Backed Securities | 24.3 |
| Investment-Grade Corporates | 23.9 |
| Non-Corporates (e.g., Supranationals) | 3.7 |
| Commercial MBS | 1.5 |
| Agency Bonds | 0.5 |