(PUB) Morningstar FundInvestor

September 2 014

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 08-31-14 )

p One Year Ago ( 08-31-13 )

Interest-Rate Review Long Treasuries continued to perform the best in August as well as for the year to date as the Barclays US Treasury Long Index returned 4.06% in August and 17.33% for the year to date. Long- term munis also did well as the Barclays Municipal Long 22+ Year Index’s 12.37% year-to-date return was the second highest. Short-term bonds in general did not fare so well in the month of August as well as for the year to date. While short-term Treasury Inflation-Protected Securities were the worst performing in August with the Barclays US Treasury TIPS 0-5 Year Index losing 0.15%, short-term Treasuries performed the worst for the year to date with the Barclays Treasury 1-5 Year Index returning a low yet positive 0.88% for the year to date.

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

-0.12

Aug. 31, 2014

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.12

08-31-14

3.00

Last Month (07-31-14)

-0.23

1.50

A Year Ago (08-31-13)

-1.08

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

2.86

Attractive 10.71

Aug. 31, 2014

12.00

High

10.71

9.00

Low

2.01

Average

4.02

6.00

Last Month (07-31-14)

2.30

3.00

A Year Ago (08-31-13)

3.60

08-31-14

0.00

Unattractive 2.01

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

Data as of Aug. 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.