(PUB) Morningstar FundInvestor

January 2 014

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 12 - 31 - 13 )

p One Year Ago ( 12 - 31 - 12 )

Interest-Rate Review December was generally a continuation of a trend in place for most of this year: Higher-yielding credit-related sectors continued to add to their positive gains for the year, while most other areas of the fixed-income market went further into negative territory. High-yield credit and leveraged bank loans continued accumulating gains, with December returns of 0.6% and 0.5%, respectively, ending the year with rare strong positive gains compared with the rest of the fixed-income market. U.S. Treasuries and Treasury Inflation-Protected Securities with intermediate maturities and longer were the biggest losers for the month, declining between 0.9% and 1.9% as Treasury rates rose during December.

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

-0.88

Dec. 31, 2013

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.14

3.00

Last Month (11-30-13)

-0.98

1.50

12-31-13

A Year Ago (12-31-12)

-0.86

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

2.84

Attractive 10.71

Dec. 31, 2013

12.00

High

10.71

9.00

Low

2.01

Average

4.08

6.00

Last Month (11-30-13)

3.02

3.00

A Year Ago (12-31-12)

3.81

12-31-13

0

Unattractive 2.01

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

Data as of Dec. 3 1, 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.