In order to be included in the Agg, bonds must be of investment grade, have an outstanding par value of at least $100 million and have at least one year until maturity.
The precursor to the Bloomberg US Aggregate Bond Index was co-created on July 7, 1973 by Art Lipson and John Roundtree, both of Kuhn, Loeb & Co., a boutique investment bank.
Municipal bonds, and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues.
Because the benchmark was founded in the 1970s, and some of its data dates back to only 1986, a time when interest rates began to decline from all-time highs, the index has only seen a few years of negative returns.
Additionally, approximately one-third of the Agg is US Treasuries, which exposes the index to US monetary policy.
The exclusion of high yield, foreign-denominated and municipal bonds, as well as certain mortgage backed securities also limits the index.