What you need to know about bond indexing

The largest weights in fixed income indices tend to be large, blue chip companies similar to equity indices.

When it comes to bond indexing, larger debt issuance does not inherently reflect higher issuer risk.

The largest issuer in the bond market is the U.S. government, which continues to be viewed as having remote default risk.

In the corporate bond market, larger companies tend to be the largest issuers. However, they also have generally had the largest asset bases and revenues to service that debt. Moreover, larger companies may be healthier on average than smaller companies.

Many of the companies held by fixed income indices are very familiar to equity investors. For example, the top weights in the widely followed corporate bond benchmark, Markit iBoxx USD Liquid Investment Grade Index, are large, blue chip companies like JP Morgan Chase, AT&T, and Verizon. In fact, a majority of the top issuers in the index are also in the top 125 holdings of the S&P 500 Index.1

Largest Issuers in Markit iBoxx USD Liquid Investment Grade Index

Top holdings in popular bond indices are similar to some large-cap equity indices


Security Description Ticker Index Weight Equity Rank in S&P 500
1 Bank of America Corp BAC 3.00% 22
2 JPMorgan Chase & Co JPM 2.85% 9
3 AT&T Inc T 2.40% 56
4 Wells Fargo & Company WFC 2.38% 26
5 Comcast Corporation CMCSA 2.34% 20
6 Citigroup Inc C 2.14% 54
7 Morgan Stanley MS 1.93% 70
8 Goldman Sachs Group Inc GS 1.91% 75
9 Anheuser Busch InBev NV BUD 1.90% 506
10 Apple Inc APPL 1.82% 1

BlackRock, IHS Markit and S&P, as of 12/31/20. Holdings subject to change.

Finally, many market capitalization indices cap issuer exposure at a certain level (e.g. 3%) or exclude higher risk countries or sectors, which limits concentration risk.