Doubleline’s Jeffrey Gundlach presented the following chart of Barclay’s total bond index (AGG and BND) in his recent presentation:

Like it or not, a holder of Vanguard’s total bond index ETF BND or iShares Barclays Aggregate Bond ETF AGG is now holding approximately 35% Treasury debt and 7% agency bonds (MBB). Since 2007, the bond index has been increasingly holding Treasury bonds.

The reason: the index is total debt outstanding weighted, which does not make good sense.

See also

Burton Malkiel: Buy Munis, Foreign Bonds, and Dividend Stocks

Long Term Treasury Bonds as Insurance Instead of Income

ETF Review: Long Term Investment Grade Bond Rose