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Why is US govt obligation %age so different between BND and AGG?

AGG tracks the "Barclays Capital U.S. Aggregate Bond Index" BND tracks the "Barclays Capital U.S. Aggregate Float-Adjusted Bond Index"
(but from what's on the Barclays Capital website, those two indexes are very similar.)
And of course each ETF's advisor has its own sampling strategy. Still -- 6.57% of AGG's income is from US govt obligations while 26.57% of BND's is from US govt obligations.
However, AGG lists Treasuries holdings of 35.62% vs. BND's 43.1% which isn't that big a difference, so why the big difference in US govt income percentages? Is it just sampling differences, with Vanguard weighting higher-coupon Treasuries more in their scheme?
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Rich Carreiro                            rlc-news@rlcarr.com
Reply to
Rich Carreiro
I believe you're confusing Treasury and Government. "Treasury" in the traditional sense doesn't even include all Treasury obligations (it excludes TIPs), let along all government agency obligations. Rather, it includes only nominal rate Treasury paper.
M* reports BND's breakdown (12/31) as 35.65% Treasuries (0% TIPs, 4.15% US Agency, 1.64% Non-US Government, and 1.95% Other Government Related - for a total of 43.38%).
Vanguard reports BND's breakdown (1/31) as 43.1% Treasury/Agency.
Reply to
Mark Freeland
Mark Freeland writes:
That's exactly my point/question, though.
Both funds (on the funds' own websites) report two things related to US obligations.
One thing they report is the percentage of 1099-DIV box 1a dividends that is from US obligations (such amount is then excluded from state taxable income).
The other thing they report is the percentage of the fund's assets that are invested in US obligations. Such amounts are exempt from state intangibles taxes (for those states that have them) and also some states only exempt US obligation income from tax if the fund invests at least 50% of its assets in US obligations.
AGG's (iShares's) website says that 6.57% of AGG's income is from US obligations and 35.62% of its assets are invested in US obligations.
BND's (Vanguard's) website says that 26.57% of BND's income is from US obligations and 43.1% of its assets are invested in US obligations.
I assume (perhaps incorrectly) that the reported income from US obligations is the income from those instruments that are reported as being US obligations the fund invested in. So how is it the funds have similar percentages invested in US obligations but have very different percentages of their income from US obligations?
(I can think of one contribution -- if one fund has a lot more short-term cap gains. Those will be included in Box 1a dividends but obviously are not income from US obligations. I believe AGG's STCGD were indeed somewhat higher than BND's, but it's not enough to explain the difference.)
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Rich Carreiro                            rlc-news@rlcarr.com
Reply to
Rich Carreiro

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