(PUB) Morningstar FundInvestor

June 2 014

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 05-31-14 )

p One Year Ago ( 05-31-13 )

Interest-Rate Review Interest rates declined in May for maturities five years and longer, with the 7-10 year portion of the Treasury yield curve showing the strongest returns. The Barclays US Treasury Long Index continued its strong year-to-date performance with an additional 2.9% return in May. Long-maturity municipal bonds also continued to do well in May with the Barclays Municipal Long 22+ Year Index generating 2.2% returns, landing in the category as the second-best-performer for the year to date after long-maturity taxable bonds. Short-duration Treasury Inflation-Protected Securities continued to show weak performance in May, as evident in the 0.7% returns for the Barclays US Treasury TIPS 0-5 Year Index.

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

Municipal-Bond Spread Snapshot Unattractive 1.73

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

7.00

-0.33

May 31, 2014

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.12

3.00

05-31-14

Last Month (04-30-14)

-0.34

1.50

A Year Ago (05-31-13)

-0.86

0.00

Attractive -1.83

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

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

2.44

Attractive 10.71

May 31, 2014

12.00

High

10.71

9.00

Low

2.01

Average

4.04

6.00

Last Month (04-30-14)

2.27

3.00

A Year Ago (05-31-13)

3.39

0.00

05-31-14

Unattractive 2.01

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

Data as of May 31 , 2014 . 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.