bond market size as of the end of the fourth quarter of 2011 was $36.6 trillion. IShares Barclays Aggregate Bond Fund (AGG) Top 10 HoldingsĪccording to the Securities Industry and Financial Markets Association (Sifma), the total U.S. The weighted average coupon of this fund is 4.36 percent. Generally, since all of these bonds trade above par, unless rates decline further, the unit value of this portfolio will gradually and inexorably decline. Using that bond as an example, unless rates are 7.5 percent in four and a half years, it will be impossible to replace the income derived from that one holding. The second largest holding in this fund is a Treasury bond bearing a 7.5 percent coupon that matures on November 15, 2016.
The coupon on each and every bond, all of which are Treasuries, is in excess of the average yield to maturity of this fund. The table below depicts the coupons of the top 10 holdings of the AGG portfolio. bond market, a certain amount of income will be difficult to replace in the next five years. If that fund actually mirrors the bulk of the U.S. Of the holdings in AGG, 36 percent mature within five years.
Judging by the iShares Barclays Aggregate Bond Fund (AGG), an exchange-traded fund which purportedly mirrors the investment-grade taxable bond market in the United States, the average yield to maturity is 1.8 percent and the weighted average maturity is 6.4 years. Given the elevated level of the bond market, "the bond market panic" may sound like a preposterous term, but it is appropriate since there is a manifest absence of yield.
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