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What you need to know about bond indexing

Portfolio construction

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, the top 10 issuers in the index are also in the top 100 holdings of the S&P 500 Index and have stock market capitalizations over $100 billion.1

Largest Issuers in Markit iBoxx USD Liquid Investment Grade Index

Top holdings in bonds indices are similar to equity indices


Largest IssuersTickerIndex WeightEquity Rank in S&P 500
1 AT&T Inc T 3.00% 13
2 JP Morgan Chase & Co JPM 2.97% 7
3 Verizon Communications Inc VZ 2.82% 18
4 Goldman Sachs Group Inc GS 2.76% 56
5 Bank of America Corp BAC 2.41% 11
6 Apple Inc AAPL 2.41% 1
7 Wells Fargo & Co WFC 2.30% 12
8 Citigroup Inc C 2.27% 22
9 Microsoft Corporation MSFT 2.23% 2
10 Morgan Stanley MS 2.22% 73

Source: BlackRock. 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.