Chart: A bond benchmark dominated by government debt

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For investors using products that track the Agg, it’s important to understand its concentrated sector exposure.

The Agg is heavily weighted toward U.S. government exposure

 

  • Many investors use products that track the Bloomberg Barclays U.S. Aggregate Bond Index (the Agg) as their core fixed-income allocation, but the Agg was never designed to be an investment portfolio. Just because there are thousands of securities in the Agg doesn’t mean that it’s well diversified across bond-market sectors.
  • The Agg is heavily concentrated in exposure to government-related fixed-income asset classes. Before the global financial crisis in 2008, U.S. Treasuries made up 22% of the Agg. But that’s increased to almost 40% today, and total government exposure is more than 70%. The bond benchmark represents the largest issuers of debt. It may not necessarily represent the best opportunities for fixed-income investors.

 

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