(PUB) Investing 2015

January 2 015

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 12-31-14 )

p One Year Ago ( 12-31-13 )

Interest-Rate Review Long-term Treasuries continued to perform the best in December as they had done throughout the year. The Barclays US Long Treasury Index’s 25.0% and 2.9% returns for the year 2014 and the month December, respectively, were the best in all fixed-income asset classes. The Barclays Municipal Long 22+ Year Index’s Dec- ember 2014 return of 1.0% was second only to long Treasuries. Further, its 15.4% return for the year 2014 was also strong, lagging just long Treasuries. Short Treasury Inflation-Protected Securities were the weakest performing in 2014, followed by global bonds. The Barclays U.S. Treasury TIPS 0-5 Year Index’s 1.1% loss for 2014 and 1.3% loss for December 2014 was among the worst in fixed- income asset classes.

6.00

5.00

4.00

3.00

2.00

1.00

Maturity

1 mo 3

6

1 yr

2

3

5

7

10

20

30

Treasury and Municipal-Bond Yields

Municipal-Bond Spread Snapshot Unattractive 1.73

p Vanguard Interm-Term Tax-Exempt p Vanguard Interm-Term U.S. Treasury

7.00

-0.10

Dec. 31, 2014

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.12

12-31-14

3.00

Last Month (11-30-14)

-0.16

1.50

A Year Ago (12-31-13)

-0.88

0.00

Attractive -1.83

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

High-Yield and Treasury-Bond Yields

p Vanguard High-Yield Corporate p Vanguard Interm-Term U.S. Treasury

High-Yield Bond Spread Snapshot

15.00

3.52

Attractive 10.71

Dec. 31, 2014

12.00

High

10.71

9.00

Low

2.01

Average

4.00

6.00

Last Month (11-30-14)

3.18

3.00

12-31-14

A Year Ago (12-31-13)

2.84

0.00

Unattractive 2.01

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Data as of Dec. 31 ,2014 . Yield Spread: The difference between yields on differing debt instruments, calculated by deducting the yield of one instrument from another. The higher the yield spread, the greater the difference between the yields offered by each instrument. For municipal bonds, a smaller spread is attractive because munis typically pay smaller yields than Treasuries. For high-yield bonds, a wider spread is more attractive because junk bonds typically pay higher yields than Treasuries.