(PUB) Investing 2016

21

September 2016

Morningstar FundInvestor

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 08-31-16 )

p One Year Ago ( 08-31-15 )

Interest-Rate Review Bonds didn’t move much in August. The Barclays U.S. Aggregate Bond Index lost 11 basis points—its first negative monthly return since the start of the year—and was weighed down by a roughly 50-basis-point loss on the Barclays U.S. Government Index. As the Federal Reserve announced that it would consider a rate increase if economic fundamentals remain steady, the U.S. Treasury yield curve lifted across all maturities for the month. Long duration Treasuries, in particular, lost a percentage point but remain outstanding year-to-date performers with a gain of 17%. Municipal markets continued to receive inflows as investors scavenged for yield, and the Barclays Municipal TR Index returned 13 basis points, supported by strong demand.

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

-0.17

Aug. 31, 2016

6.50

High

1.73

5.00

Low

-1.83

Average

0.08

4.50

08-31-16

3.00

Last Month (07-31-16) A Year Ago (08-31-15)

-0.27

-0.34

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

3.83

Aug. 31, 2016

12.00

High

10.71

Low

2.01

9.00

Average

4.02

6.00

Last Month (07-31-16) A Year Ago (08-31-15)

4.07

3.00

4.16

08-31-16

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 Aug. 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.