We use detailed data on fixed-income benchmark indexes in Canada and the U.S. to provide systematic evidence of how benchmarking shapes corporate bond ownership and prices. Funds hold sparse portfolios, and index weights strongly influence which bonds active and passive funds select. We rationalize these patterns in a model with benchmarked managers who face portfolio management costs, which predicts which assets managers optimally include in their portfolios. In the model, a bond's price increases with its benchmarking intensity (BMI)—a measure of the amount of fund capital benchmarked against the bond—while portfolio sparsity attenuates this price impact for excluded bonds. Exploiting discontinuities in benchmarked assets around bond maturity cutoffs, we show that increases in bonds’ BMIs lead to reductions in yield spreads and increases in fund ownership—but only for bonds predicted to enter sparse portfolios.