Barclays Capital has won over Vanguard for its float-adjusted fixed-income indices. Vanguard will use the Barclay's benchmarks for a dozen of its fixed income index mutual funds starting in the fourth quarter.

Vanguard officials told the media that the move was made because they better reflect market liquidity.

Liquidity's importance to bond holders was underscored by the events last year that led to the purchase of $125 billion in agency bonds by the U.S. government.

The fact that there is no market in those bonds introduces tracking error for funds that benchmark to indices that fail to adjust for the change.

Indeed, it was those events that spurred Barclays Capital to introduce the indices in July, reports Bank Investment Consultant. 

Edited by: Sean Hanna, Editor in Chief


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