Intro to bond indexes

An index is a group of securities that’s designed to represent a market—or a segment of a market. An index is used to measure and report the changes in the market (or market segment) it’s tracking. There are indexes for the stock market, bond market, and other market indexes as well, such as commodities and currencies.

Bond indexes are aggregate measures designed to track the overall bond market—or specific segments of it (for example, Treasuries, investment‑grade corporate bonds, high yield, or municipals). Many widely used bond benchmarks are created and maintained by dedicated index providers (rather than by the Federal Reserve), while the Federal Reserve primarily publishes market interest-rate series that investors often use for context on yields.

Like stock indexes, most bond indexes use a defined set of bonds—selected using rules such as minimum issue size, maturity, credit quality, and other eligibility screens—to represent and help chart the performance of a larger universe of bonds.

There are broad (composite) bond indexes that measure performance across a wide range of bonds, as well as more specialized indexes focused on particular categories (for example, municipal bond indexes, corporate/credit indexes, and sector-focused indexes).

Most bond indexes are designed to measure price changes and/or total return (income plus price movement), and many also publish yield statistics for the bonds in the index. A key driver of bond index performance is the well-established concept that market interest rates and the prices of fixed‑rate bonds generally move in opposite directions. If market interest rates decline after a bond is issued, that bond’s price typically rises—so its yield stays in line with yields on comparable bonds available in the market. Conversely, when interest rates move higher, existing bond prices generally fall. This is often described as the inverse relationship between bond prices and interest rates. The extent of the price fluctuation can vary based on factors like time to maturity, credit rating, and other characteristics. Because of this, many bond indexes are designed to track the actual price (or total return) performance of the bonds in the index, while others focus on tracking yields. Some indexes publish both price levels and the associated yields.

Bond indexes can be a useful tool for following the fixed income market and making more informed investing decisions. For example, you can use bond indexes to monitor how the overall bond market—or a specific segment, such as Treasuries, investment-grade corporates, high yield, or municipals—is performing over time.

Bond indexes are also commonly used as benchmarks. If you own a bond mutual fund or bond ETF, you can compare its performance to a relevant bond index to help evaluate results in context (for instance, whether returns are generally in line with that part of the market).

Finally, investors sometimes look at bond market measures alongside stock market performance when assessing broader market conditions. While bond yields and stock prices can move in opposite directions at times, that relationship isn’t consistent in every market environment—so indexes are best used as reference points rather than forecasts.

CRC# 5412521 (05/2026)