(PUB) Investing 2016

21

February 2016

Morningstar FundInvestor

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current (0 1-31-16 )

p One Year Ago (0 1-31-15 )

Interest-Rate Review On the heels of the Fed’s announcement to tighten monetary policy, the Treasury yield curve flattened over the course of the month. The Barclays U.S. Aggregate Bond Index returned 1.38%. A rate hike and extreme market volatility led to a big rally in long-maturity Treasuries. Treasury Inflation-Protected Securities made a round- about from the previous month, with the Barclays U.S. Treasury TIPS Index delivering 55 basis points. High-yield bonds continued to sell off because of worries about the impact of lower oil prices on energy companies.

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

-0.05

Unattractive 1.73

Jan. 31, 2016

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.09

01-31-16

3.00

Last Month (12-31-15)

-0.04

1.50

A Year Ago (01-31-15)

-0.19

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

5.08

Attractive 10.71

Jan. 31, 2016

12.00

High

10.71

9.00

Low

2.01

Average

4.01

6.00

Last Month (12-31-15)

4.68

3.00

01-31-16

A Year Ago (01-31-15)

3.73

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 Jan. 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.