(PUB) Investing 2016

21

June 2016

Morningstar FundInvestor

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current (0 5-31-16 )

p One Year Ago (0 5-31-15 )

Interest-Rate Review The bond market was little changed in May as the chances of a June rate hike have risen. The Barclays U.S. Aggregate Index gener- ated a modest 0.03% return for May, and the Barclays Corporate Index lost 0.08% for the month. An improving U.S. economic outlook underpinned positive return in mortgages, with the Barclays U.S. MBS Index generating 0.13% of return. The yield curve flattened at the shorter end, as anticipation of a U.S. Federal Reserve interest- rate rise intensifies. The municipal markets remain a bright spot; the Barclays Municipal TR Index delivered its 11th straight month of positive returns and provided 0.27% for May. Weak overseas econo- mic growth has continued to drag on the local-currency-denominated JPM GBI-EM Global Composite, which lost 5.58% for the month but posted a 7.91% gain for the year to date.

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

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

Municipal-Bond Spread Snapshot

7.00

Unattractive 1.73

-0.13

May 31, 2016

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.08

05-31-16

3.00

Last Month (04-30-16)

-0.22

1.50

A Year Ago (05-31-15)

-0.40

0.00

Attractive -1.83

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

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

4.37

Attractive 10.71

May 31, 2016

12.00

High

10.71

9.00

Low

2.01

Average

4.02

6.00

Last Month (04-30-16)

4.28

3.00

05-31-16

A Year Ago (05-31-15)

3.44

0.00

Unattractive 2.01

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Data as of May 31 , 2016 . 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.