Bond Market Index

Introduction to Bonds

A bond market index is a listing of bonds or fixed income instruments and a statistic reflecting the composite value of its components. It is used as a tool to represent the characteristics of its component fixed income instruments. They differ from stock market indices in their complexity.

Types of indices - Bond indices can be categorized based on their broad characteristics, such as whether they are government bonds, corporate bonds, high-yield bonds, mortgage-backed securities, etc. They can also be classified based on their credit rating or maturity.

Weighting - Most bond indices are weighted by market capitalization. This results in the bums problem, in which less credit worthy issuers with a lot of outstanding debt constitute a larger part of the index than more credit worthy ones.

Indices and passive investment management - Bond indices are harder to replicate compared to stock market indices. This is because the average duration of the market may not be the most appropriate duration for a given portfolio. Replication can be achieved by using bond futures to match the duration of the bond index.

List of bond market indices

Lehman Aggregate Bond Index
The Lehman Aggregate Bond Index is a broad base index often used to represent investment grade bonds being traded in United States. Index funds and exchange-traded funds are available that track this bond index.

U.S. bonds
Lehman U.S. Aggregate
Salomon BIG
The Salomon Broad Investment Grade Index (known as the Salomon BIG or Citigroup BIG) is a common American Bond index, akin to the S&P 500 for stocks, originally owned by Salomon Brothers and now run by its successor, Citigroup.

Merrill Lynch Domestic Master
The Merrill Lynch Domestic Master is a common American Bond index, analogous to the S&P 500 for stocks, owned by Merrill Lynch.

World Government bonds
Salomon Smith Barney World Government Bond Index
The Salomon Smith Barney World Government Bond Index is a market capitalization weighted bond index consisting of the government bond markets.

Emerging market bonds
J.P. Morgan Emerging Markets Bond Index
J P Morgan has three bond indices to track bonds in emerging markets.

Fidelity Bond Market
Choice.Tools. Transparent Pricing. The Fidelity Open Bond Market.
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