(PUB) Investing 2015

June 2015

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 05-31-15 )

p One Year Ago ( 05-31-14 )

Interest-Rate Review Bond yields rose across the Treasury curve in May 2015, putting downward pressure on U.S. Treasury prices. Long-term bonds took a big skid, falling 1.6%, as measured by the Barclays U.S. Treasury Long Index. Despite the increase in nominal bond yields, the U.S. inflation rate fell to negative 0.2% in May from negative 0.1% in April. This caused U.S. Treasury Inflation- Protected Securities to decline 0.8%, as measured by the Barclays U.S. TIPS Index. Riskier credits fared better, with high-yield corporate bonds up 0.3% for the month and high-yield municipals gaining 1.1%.

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

-0.40

May 31, 2015

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.10

3.00

05-31-15

Last Month (04-30-15)

-0.36

1.50

A Year Ago (05-31-14)

-0.33

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 Yieldsv

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

High-Yield Bond Spread Snapshot

15.00

3.44

Attractive 10.71

May 31, 2015

12.00

High

10.71

9.00

Low

2.01

Average

4.00

6.00

Last Month (04-30-15)

3.46

3.00

05-31-15

A Year Ago (05-31-14)

2.44

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 May 29 , 2015 . 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.