Lord Abbett Explains Pitfalls of Current Bond Market

Research published by Lord Abbett covers the current state of the broad U.S. bond market benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (popularly known as the “Agg”). The Agg is a mix of fixed income investments and is commonly used as a representation of the bond market performance in the U.S. This research shows that since 2008 the bond market in the U.S. has become riskier and has a lower yield than in years past.

Key Takeways

  • The Agg has far more U.S. Treasury securities than it has had exposure to in the past because it is market cap weighted and the U.S. government has issued an enormous amount of debt since 2008.
  • In 2008 the yield to maturity for the Agg was about 4.50%. As of September 18, 2020, the YTM for the Agg is 1.19%.
  • The Agg is taking more duration risk than it has in the past. The effective duration has recently reached a historical high of 6.17 years.

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