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How do you use the U.S. bond market index?

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Quick Answer

Most bond investors follow the Barclays capital U.S. aggregate bond market index strategy. It is composed of all types of securities that trade in U.S. markets, reports Forbes. Barclays Risk Analytics and Index Solutions is the administrator and sponsor for the index, which is a benchmark strategy for portfolio construction. It uses prices provided from the Barclays bank trading desk, according to the Barclays disclaimer.

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Dollar-denominated, taxable, fixed-rate securities issued in the United States make up the Barclays aggregate index, reports Kiplinger. It includes corporate bonds, Treasurys, government-agency and asset-backed bonds. Investors use the index as the standard for measuring the U.S. fixed-income market because of its specific weighting and risk allocation strategy, indicates the Financial Times.

Because the Barclays aggregate index adds and drops issues monthly, one exchange-traded fund that tracks the index has a 130 percent turnover rate annually. In the iShares Barclays aggregate bond ETF, the average holding is less than a year, according to Kiplinger. While it does not track the Barclays aggregate index exactly, it has 1,500 representative holdings from a total of 8,000. Strategies for the ETF include buying new issues ahead of the Barclays aggregate index, or selling after the Index for better pricing.

The Securities Industry and Financial Markets Association is a trade group with a database that tracks the entire U.S. market, including municipal bonds and money market funds. It tracks valuations and defaults, states Forbes.

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