Extending the Barcap Back to 1900: Introducing a New Total Bond Index

Abstract

The Lehman / Barclay’s / Bloomberg Aggregate Bond Index dates to the 1970s. Historical back tests of investment strategies and outcomes that extend past 1973 have had to use either long bonds or short Treasuries. In terms of capturing returns over a complete market cycle, both long and short bonds are problematic relative to a total bond index, which obtains its yield from across the entire maturity range while maintaining an intermediate duration. This paper assembles eight bond series to simulate returns on a total bond index from 1900 to 1973. The individual series are for government bonds and corporate bonds, and for long, longer intermediate, shorter intermediate, and short maturities. Both the individual series and an equal-weighted composite are presented in down-loadable form. Some of the series have been previously compiled from observed prices while others were compiled specifically for this project using multiple sources. A brief interpretation of the behavior of the total bond index relative to its components is offered.

Keywords: total bond index, intermediate bonds, duration, long bonds versus short bonds

JEL Classification: G12,N11,N12