(PUB) Morningstar FundInvestor

September 2013

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 08 - 31 - 13 )

p One Year Ago ( 08 - 31 - 12 )

Interest-Rate Review August was hard on bonds. With the exception of the shortest- dated U.S. Treasuries, yields rose modestly across the curve during the month, and intermediate-term and long-term Treasuries continued to suffer losses. Emerging-markets was among the hardest-hit sectors, with the JPMorgan Government Bond Index- Emerging Markets Index dropping 4.2%. High-yield and long- term munis also continued its summer weakness, with losses of 3.6% and 2.9%, respectively, while intermediate-term munis fared relatively better with a 1.1% decline. Corporate bonds also posted modest losses for the month, with investment-grade names down 1.1% and high-yield declining 0.8%.

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

Municipal-Bond Spread Snapshot Unattractive 1.73

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

7.00

-1.14

Aug. 31, 2013

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

- 0.96

3.00

Last Month (07-31-13)

-1.08

1.50

A Year Ago (08-31-12)

-0.96

08-31-13

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

3.53

Attractive 10.71

Aug. 31, 2013

12.00

High

10.71

9.00

Low

2.01

Average

4.10

6.00

Last Month (07-31-13)

3.60

3.00

A Year Ago (08-31-12)

4.25

0

08-31-13

Unattractive 2.01

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

Data as of Aug. 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.