(PUB) Morningstar FundInvestor

July 2 014

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 06-30-14 )

p One Year Ago ( 06-30-13 )

Interest-Rate Review High yield performed the best in June as seen in the Barclays US Corporate High Yield’s 0.84% return. However, on a year-to-date basis, long-term bonds still show the strongest returns as 30 Year US Treasury yields showed the biggest decline and the Barclays US Treasury Long Index showed year-to-date returns of 12.1%. On the other hand, intermediate maturities did not fare so well in June as the 2–7 year portion of the Treasury yield curve showed the biggest yield hike. Further, the Barclays US Treasury 5-7 Year Index was the third-worst-performing index in June at a 0.2% loss. That said, high-yield munis performed the worst in June as the Barclays High Yield Muni Index showed the biggest loss at 1.8%.

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

-0.23

June 30, 2014

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.12

06-30-14

3.00

Last Month (05-31-14)

-0.33

1.50

A Year Ago (06-30-13)

-0.96

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

2.30

Attractive 10.71

June 30, 2014

12.00

High

10.71

9.00

Low

2.01

Average

4.03

6.00

Last Month (05-31-14)

2.44

3.00

A Year Ago (06-30-13)

3.84

0.00

06-30-14

Unattractive 2.01

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

Data as of June 30 , 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.