Lehman Shakes Up Bond Indices

June 17, 2003 (PLANSPONSOR.com) - The Lehman Brothers US Aggregate Bond Index will be sans smaller bonds issues as part of sweeping changes scheduled for October 1 to the most widely used US bond indexes .

In addition to dropping smaller issues, Lehman will also begin requiring a Standard & Poor’s rating for a bond to be included in its investment-grade indexes.   Any bonds rated below investment grade by Moody’s Investors Service or Standard & Poor’s will fall into high yield indexes, according to a Reuters report.

The changes to the Aggregate Index will reduce the number of bonds in the index by 13%, or 970 securities and the market value of the index will decline 2%, or $170 billion, following the changes.   The reduction will take place because Lehman is increasing the liquidity constraint for Treasury, agency, corporate bonds and mortgage-backed securities to $200 million from $150 million.