One of the major bond ETFs, which acts de facto as a benchmark for many bond investors, is the iShares Core U.S. Aggregate Bond ETF, ticker AGG. AGG, says ThinkAdvisor, suffered its “biggest single outflow in the fund’s 15-year history” last week as investors pulled $2 billion on Tuesday alone.
FIGURE 1: 3-YEAR PRICE TREND FOR BOND ETF AGG
Source: Nasdaq.com, data as of 10.15.18
MarketWatch reported last week on the bond index that AGG strives to track, writing,
They also note that AGG is “down around 4.5% this year,” but that “doesn’t reflect total returns.”
Charlie Bilello of Pension Partners constructed the illustration of the relationship between the U.S. 10-year Treasury yield and the 2018 performance of AGG seen in Figure 2, as well as Table 1, which shows down years for the Barclays U.S. Aggregate Bond Index. He wrote regarding the potential for further annualized total return losses on funds and ETFs tracking the Index, “-3% would be the worst year ever (data back to 1976). What bonds lose in their worst year stocks can lose in a day.”
FIGURE 2: 10-YEAR U.S. TREASURY YIELD VS. AGG 2018 TOTAL RETURN
TABLE 1: BARCLAYS AGGREGATE U.S. BOND INDEX—DOWN YEARS (1976–2017)
Source: Charlie Bilello (@charliebilello), data as of 10.4.18
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