Responding to the financial crisis, the Federal Reserve lowered the federal-funds rate to near zero in 2008. Around that time, the Department of the Treasury started issuing a record amount of Treasury bonds to address long-term Medicare and Social Security related expenses, while taking advantage of low interest rates.
As a result, Treasuries' share of the investment-grade universe climbed significantly. The market-cap-weighted Bloomberg Barclays U.S. Aggregate Bond Index, the most widely cited U.S. investment-grade benchmark, now has more than one third of its portfolio invested in Treasuries.
Phillip Yoo, CAIA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.