(PUB) Morningstar FundInvestor

21

Morningstar FundInvestor

July 2 013

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 06 - 30 - 13 )

p One Year Ago ( 06 - 30 - 12 )

Interest-Rate Review Talk of Fed tapering led interest rates on taxable and municipal bonds to bounce higher. Spreads between municipal bonds and Treasuries grew slightly in response to growing problems for municipal issuers such as Detroit. High-yield spreads also wid- ened versus Treasuries, though they remain slightly below the aver- age level. Municipal-bond and high-yield managers are telling us that these moves could lead to a pretty good buying opportunity if this trend continues.

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

-0.96

June 30, 2013

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.18

3.00

Last Month (05-31-13)

-0.86

1.50

06-30-13

A Year Ago (06-30-12)

-1.18

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

3.84

Attractive 10.71

June 30, 2013

12.00

High

10.71

9.00

Low

2.01

Average

4.10

6.00

Last Month (05-31-13)

3.39

3.00

A Year Ago (06-30-12)

5.02

06-30-13

0

Unattractive 2.01

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

Data as of June 30 , 2 013. 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.