Barclays Capital Aggregate Bond Index definition

This US index tracks the performance of investment-grade fixed income securities such as bonds

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What is the Barclays Capital Aggregate Bond Index? Find out below – Photo: Shutterstock
                                

What is the Barclays Capital Aggregate Bond Index?

The index was created by Lehman Brothers in 1986 to provide an accumulated exposure to the US bond market. It was initially called the Lehman Brothers Aggregate Bond Index, until Barclays Bank purchased it in 2008 after the Lehman bankruptcy.

Now called the Barclays Agg or BarCap Aggregate, the index is composed of different types of bonds, such as government bonds, corporate bonds, mortgage-backed securities and asset-backed securities. The index reflects movements in the overall bond market, and is considered to be among the most important indexes when it comes to the bond market in the US.

Bonds included in the index have certain characteristics. They are investment grade bonds with a credit rating of BBB and above according to the S&P rating scale, or Baa3 by the Moody’s scale. The bonds are of medium-term maturity and have a minimum period of one year until maturity, with a minimum par value of $100m.

Barclays Capital Aggregate Bond Index meaning

Since 2016, the index has been known as Bloomberg Barclays US Aggregate Bond index. The index is structured as a market capitalisation-weighted index. Hence, the weight of the bonds included in the index reflects the market size of the relevant bond category.

As a broad bond index, it consists of a high number of US traded bonds, as well as bonds that are traded in the US market. Bonds included or hoping to be included in the index should have their principal and interest rate paid in dollars.

Investors benefit from the index by investing in mutual funds and Exchange Traded Funds (ETFs) linked to the BarCap index. Some of the more popular ETFs associated with the index are Schwab US Aggregate ETF, iShares Core US Aggregate Bond ETF and Vanguard Total Bond Market ETF.

Barclays Capital Aggregate Bond Index explained

Bond constituents of the index have a fixed-rate coupon, while callable fixed-to-floating rate bonds can be eligible for inclusion during the fixed-rate period. Bonds with at least a BBB credit rating according to S&P and Fitch, or Baa3 on the Moody’s scale, can be included in the index.

Depending on the bond type, the index has defined certain requirements regarding the outstanding value. For instance, treasury, government and corporate bonds should have a minimum value of $250m per amount outstanding. Mortgage-backed securities should have an accumulated value of $1bn per outstanding amount, while asset-backed securities should have at least $500m worth of deal size with a minimum tranche size value of $25m.

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