# Bloomberg Aggregate Bond Index: Definition and Who Tracks It

![Bloomberg Aggregate Bond Index: A broad-based fixed-income index used by bond traders and fund managers as a benchmark to measure their relative performance.](https://www.investopedia.com/thmb/nD-ZwJnotzeoQi4JTrpIF1j9rzM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/lehmanaggregatebondindex_final-ec61c0cf6eec461682d74f554c56ec89.png)

*— Investopedia / Michela Buttignol*

> **Definition**
>
> The Bloomberg Aggregate Bond Index is a broad-based fixed-income index used by bond traders and the managers of mutual funds and exchange-traded funds as a benchmark to measure their relative performance.

## What Is the Bloomberg Aggregate Bond Index?

The Bloomberg Aggregate Bond Index serves as a vital benchmark for bond funds, reflecting the health of over $50 trillion in fixed-income securities. Known as the "Agg" since August 2021, it tracks investment-grade bonds, including U.S. Treasurys and corporate bonds, providing insights into the U.S. economy's broader health.

### Key Takeaways

*   The Bloomberg Aggregate Bond Index is a comprehensive benchmark for the U.S. investment-grade bond market, reflecting over $50 trillion in securities.
*   Known as "the Agg," this index is integral for bond funds and traders as it measures relative performance against the broader market.
*   The index includes U.S. Treasurys, corporate bonds, and mortgage-backed securities, excluding high-yield or junk bonds.
*   The iShares Core U.S. Aggregate Bond ETF (AGG) is one of the largest ETFs tracking the Bloomberg Agg, with significant assets and liquidity.
*   Although the index excludes certain sectors, it remains a crucial tool for gauging economic conditions and monetary policy impacts.

## Comprehensive Overview of 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](https://www.investopedia.com/terms/w/wilshire5000equityindex.asp) is to the equity market. The Agg index includes Treasury securities, corporate bonds, mortgage-backed securities (MBS), asset-backed securities, and municipal bonds. It 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 portfolio performance against a comprehensive standard, assessing how their investments compare to the broader market.

By following the index, investors can gain insights into interest rate movements, credit risk, and overall market sentiment. A rising Agg value usually means a favorable bond environment with falling interest rates, while a declining Agg indicates rising risks or rates. featuring declining interest rates, while a declining Agg suggests increasing risk or rising rates. The Agg's composition, which includes many U.S. Treasurys, reflects U.S. monetary policy and economic changes.

However, investors should note that the Agg excludes [high-yield ("junk") bonds](https://www.investopedia.com/terms/j/junkbond.asp) and some municipal securities, limiting its effectiveness as a comprehensive market indicator. Despite these limits, the Agg is vital for investors to benchmark fixed-income investments and assess performance against the broader bond market.

> **Fast Fact**
>
> 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.

## Breakdown of the Bloomberg Aggregate Bond Index Components

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):

## ETFs and Mutual Funds Tracking 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.

## 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](https://www.investopedia.com/terms/g/gse.asp#:~:text=Key%20Takeaways-,A%20government%2Dsponsored%20enterprise%20%28GSE%29%20is%20a%20quasi%2D,loans%20from%20lenders%2C%20ensuring%20liquidity.), 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](https://www.investopedia.com/articles/investing/081215/top-3-mortgage-backed-securities-mbs-etfs.asp) 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, or "Agg," is a critical benchmark for the U.S. investment-grade bond market, reflecting over $50 trillion in fixed-income securities. It includes U.S. Treasurys, high-grade corporate bonds, and other investment-grade assets. While it offers a comprehensive view, it excludes high-yield and certain municipal bonds.

Investors can track the Agg through ETFs like the iShares AGG and mutual funds, such as the Vanguard Total Bond Market Index Fund, providing a diversified fixed-income portfolio. This index serves as a crucial tool for gauging market health and aligning with economic conditions.

> **Article Sources**
>
> 1.  Barron's. "'[The Agg' Is Getting a New Name Again. Bloomberg Has Bigger Plans for Its Index Business](https://www.barrons.com/articles/bloomberg-us-aggregate-bond-index-name-51629758170)."
>     
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>     
> 3.  Bloomberg. "[Bloomberg Fixed Income Indices](https://www.bloomberg.com/professional/product/indices/bloomberg-fixed-income-indices/#/)."
>     
> 4.  iShares. "[iShares Core U.S. Aggregate Bond ETF](https://www.ishares.com/us/products/239458/ishares-core-total-us-bond-market-etf)."
>     
> 5.  Vanguard. "[Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), Overview](https://investor.vanguard.com/mutual-funds/profile/overview/vbtlx)."
>     
> 6.  Vanguard. "[Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), Portfolio](https://investor.vanguard.com/mutual-funds/profile/portfolio/vbtlx)."
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> 7.  Bloomberg. "[Bloomberg Completes Fixed Income Indices Rebrand](https://www.bloomberg.com/company/press/bloomberg-completes-fixed-income-indices-rebrand/)."
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> 8.  Bloomberg. "[Bloomberg Fixed Income Index Methodology](https://assets.bbhub.io/professional/sites/27/Fixed-Income-Index-Methodology.pdf)." Pp. 5-7.
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