Bloomberg U.S. Aggregate Bond Index Carries 5.7-Year Rate Risk as Treasurys Reach 46%
Updated
Updated · CNBC · Jul 21
Bloomberg U.S. Aggregate Bond Index Carries 5.7-Year Rate Risk as Treasurys Reach 46%
3 articles · Updated · CNBC · Jul 21
Summary
A 1-percentage-point rise in interest rates would cut an Agg-tracking fund by about 5.7%, highlighting the benchmark bond index's duration risk for investors using it as a core holding.
That sensitivity matters more with traders assigning an 87% chance that the Federal Reserve raises rates by at least a quarter point by year-end, according to CME FedWatch.
The index is also tilted toward lower-yielding government debt, with Treasurys making up 46% of holdings, limiting income potential even as credit risk stays relatively low.
Advisers said the Agg can still work as a diversified recession hedge and volatility dampener, but many investors may want to pair it with other bond funds to reduce rate exposure or add inflation protection.