(PUB) Morningstar FundInvestor

May 2 014

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 04-30-14 )

p One Year Ago ( 04-30-13 )

Interest-Rate Review U.S. interest rates fell across the board in April, propelling longer- duration government-related fare to the strongest gains for the month. Taxable long-term bonds, as measured by the Barclays U.S. Long Treasury Index, led the way with a 2.0% return, adding to the fund’s impressive year-to-date showing of 9.2% through April 30, 2014. April was also a strong month for municipal bonds of all maturities, and both the Barclays Municipal Long 22+ Year and Barclays Municipal Intermediate 5-10 Year indexes had solid returns of 1.6% and 1.2%, respectively. U.S. TIPS notched a strong 1.4% return, bringing that sector’s year-to-date perform- ance to 3.3%.

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

-0.34

April 30, 2014

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.13

3.00

04-30-14

Last Month (03-31-14)

-0.47

1.50

A Year Ago (04-30-13)

-0.91

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

2.27

Attractive 10.71

April 30, 2014

12.00

High

10.71

9.00

Low

2.01

Average

4.05

6.00

Last Month (03-31-14)

2.42

3.00

A Year Ago (04-30-13)

3.52

0.00

04-30-14

Unattractive 2.01

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

Data as of April 30, 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.