Barclays Capital Aggregate Bond Index

Index characteristics

The Barclays Capital Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in U.S.

The Barclays Capital Aggregate Bond Index is an intermediate term index. The average maturity as of December 31, 2009 was 4.57 years.

Investing

Many index funds and exchange-traded funds attempt to replicate (before fees and expenses) the performance of the Lehman Aggregate. Some examples of such funds include iShares Lehman Aggregate Bond (AGG), Thrift Savings Plan Fixed Income Index fund, Vanguard Total Bond Market Index Fund (VBMFX), and Fidelity U.S. Bond Index Fund (FBIDX). Fund managers sometimes subdivide the different parts of the Aggregate by maturity or sector for managing individual portfolios. The Municipal section of the index is the only part of the index that cannot be used for this purpose - because municipal debt is issued by so many different entities, the Municipals in the Aggregate are only intended to be representative, and Lehman maintains separate indices for maintaining Municipal-only portfolios.

Reference : Richard A. Ferri, All About Asset Allocation, McGraw-Hill, 2006, ISBN 0-07-142958-1

Source : Google, Wikipedia