(PUB) Investing 2016

21

August 2016

Morningstar FundInvestor

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 07-31-16 )

p One Year Ago ( 7-31-15 )

Interest-Rate Review Bonds continued to rally as the Barclays U.S. Aggregate Bond Index rose 0.6% in July. The yield curve continued to flatten, with the Barclays U.S. Treasury Long Index growing by 2.2% for the month and up a whopping 17.7% for the year to date. Yield-hungry investors also drove the Barclays IG Corporate Index up 1.5% for the month. Although an energy sell-off hit high-yield hard from November through February, the sector has bounced back, with a 13% return from March through the end of July. Although inflation remains stubbornly low, the Barclays U.S. TIPS Index rose 0.9% for the month.

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

-0.27

July 31, 2016

6.50

High

1.73

5.00

Low

-1.83

Average

0.08

4.50

3.00

07-31-16

Last Month (06-30-16) A Year Ago (07-31-15)

-0.24

-0.30

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

4.07

July 31, 2016

12.00

High

10.71

Low

2.01

9.00

Average

4.02

6.00

Last Month (06-30-16) A Year Ago (07-31-15)

4.45

3.00

3.70

07-31-16

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 July 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.