Growth of Treasury bonds in overall bond market

AP News
Posted: Mar 29, 2012 6:13 PM
Growth of Treasury bonds in overall bond market

U.S. Treasurys are a much bigger component of the overall bond market than they were a few years ago.

At the end of 2011, Treasurys made up more than 35 percent of the Barclays Capital U.S. Aggregate bond index, the most widely used bond market benchmark. Four years earlier, Treasurys made up just 22 percent. As a result, higher-yielding corporate bonds and other types of bonds are smaller segments of the overall index.

One key reason for the growth of Treasurys is the trillions of dollars the Federal Reserve has spent since the financial crisis in 2008 to buy the government's IOUs. Another factor is recent growth in the amount of bonds the government issues to deal with its growing debt load. The Fed has bought Treasurys to stimulate the economy, and to keep Treasury yields so low that investors have greater incentive to take more risk by getting back into the stock market.

Many index mutual funds track the Barclays bond index, so their stakes in Treasurys have risen in recent years. Plenty of actively managed funds also have larger portions of their portfolios invested in Treasurys, and many investors may be surprised that they've invested so much in government debt.

Below are year-end figures showing the growth of the Treasury component in the Barclays index, going back a decade:

2001: 22 percent

2002: 21.9

2003: 22.2

2004: 24.7

2005: 25.2

2006: 24.7

2007: 22.4

2008: 25.1

2009: 27.7

2010: 33.8

2011: 35.2


Source: Barclays Capital