(PUB) Morningstar FundInvestor

21

Morningstar FundInvestor

August 2 013

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 07 - 31 - 13 )

p One Year Ago ( 07 - 31 - 12 )

Interest-Rate Review Bond markets stabilized some in July after a rough June. After spiking to a 2.7% yield early in the month, the 10-year Treasury rallied after Fed chairman Ben Bernanke reaffirmed the Fed’s commitment to an accommodative monetary policy. Still, the 10-year lost ground later in the month, and long-term and interme- diate-term Treasuries continued their losing streak. Municipal bonds also struggled in a month that featured the announcement of Detroit’s bankruptcy filing. High-yield munis lost 2.2%, while long-term munis fell 2.5%; intermediate-term munis were close to flat for the month. Corporate bonds fared better, with investment- grade names up 0.8% for the month, and high yield posting a 1.9% gain.

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

-1.08

July 31, 2013

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.17

3.00

Last Month (06-30-13)

-0.96

1.50

A Year Ago (07-31-12)

-1.07

07-31-13

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

3.60

Attractive 10.71

July 31, 2013

12.00

High

10.71

9.00

Low

2.01

Average

4.10

6.00

Last Month (06-30-13)

3.84

3.00

A Year Ago (07-31-12)

4.53

0

07-31-13

Unattractive 2.01

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

Data as of July 31 , 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.