(PUB) Investing 2016

21

July 2016

Morningstar FundInvestor

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 06-30-16 )

p One Year Ago (0 6-30-15 )

Interest-Rate Review The Brexit vote spurred a bond rally as the Barclays US Aggregate Bond Index rose 1.8% in June. Worries that the world economy would slow caused the yield curve to flatten, benefiting in particular long US Treasuries, which have gained 15.1% in 2016. Inflation expectations rose with delayed interest-rate action by the Federal Reserve, and the US Treasury TIPS Index gained 2.1% for the month. The local-currency-denominated JPM GBI-EM Global Com- posite Index gained 6.6% for June, while the Barclays Municipal Index continued its climb and registered its 12th-straight month of positive returns by returning 1.6%.

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 Unattractive 1.73

7.00

-0.24

June 30, 2016

6.50

High

1.73

5.00

Low

-1.83

Average

0.08

4.50

3.00

06-30-16

Last Month (05-31-16) A Year Ago (06-30-15)

-0.13

-0.31

1.50

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

Attractive 10.71

4.45

June 30, 2016

12.00

High

10.71

Low

2.01

9.00

Average

4.02

6.00

Last Month (05-31-16) A Year Ago (06-30-15)

4.37

3.00

3.52

06-30-16

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 June 30 , 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.