In the midst of a strong year for stocks, bonds continue to suffer. The Bloomberg Barclays U.S. Aggregate Bond index, maybe the most prominent benchmark among bond indexes, is on track to post its second-worst showing in history.
Year to date, the index year is down around 2.5 percent on a total return basis, which takes into account both the value of bonds held in the basket and the yields derived from those assets. The Barclays Agg's weakest returns came in 1994, when the index slipped around 2.9 percent, so it wouldn’t take much for the index to log its worst yearly performance.
What is the Barclays Agg? It is largely composed of U.S. government bonds and mortgage-backed securities backed by government-sponsored enterprises, including Fannie Mae and Freddie Mac, and underweights the riskier corners of the bond market, including high-yield corporate debt or collateralized loan obligations. Ultra-safe Treasury notes represented around 36 percent of the index in 2017.