(PUB) Morningstar FundInvestor

October 2013

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 09 - 30 - 13 )

p One Year Ago ( 09 - 30 - 12 )

Interest-Rate Review With the exception of long-maturity U.S.Treasuries, those sectors of the bond market that have been hit the hardest thus far in 2013 notched the biggest gains during the month of September. Emerging-markets local-currency sovereign debt led the way, with the JPMorgan Government Bond Index-Emerging Markets Index rallying 5.1% during the month while the U.S-dollar emerg- ing markets debt benchmark also notched a solid gain of 2.7%. Municipal bonds also rebounded strongly after a rough summer on the heels of Detroit’s bankruptcy filing, including a 3.3% and 3.2% gain for the high-yield and long-term muni indexes, respec- tively. The belly of the U.S. Treasury curve posted solid gains, with the intermediate maturity indexes gaining roughly 1.5% as yields declined during the month.

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

-1.05

Sept. 30, 2013

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.16

3.00

Last Month (08-31-13)

-1.14

1.50

A Year Ago (09-30-12)

-1.02

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

3.35

Attractive 10.71

Sept. 30, 2013

12.00

High

10.71

9.00

Low

2.01

Average

4.09

6.00

Last Month (08-31-13)

3.53

3.00

A Year Ago (09-30-12)

4.09

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 Sept. 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.