(PUB) Morningstar FundInvestor

February 2 014

Morningstar FundInvestor

21

Bond-Market Snapshot

Treasury Yield Curve ( % )

Yield to maturity of current bills, notes, and bonds

p Current ( 01 - 31 - 14 )

p One Year Ago ( 01 - 31 - 13 )

Interest-Rate Review The first month of 2014 was good to most of the bond market, particularly U.S. Treasuries, Treasury Inflation-Protected Securities, and municipal bonds as interest rates declined across the curve during the month of January. For instance, the Barclays U.S. Long Treasury Index notched the biggest gains of the period of 5.5%, while the long maturity muni index was close behind with a 3.1% gain. Investment-grade corporates were up 1.8% for the month, more than making up for losses experienced during the 2013 calendar year. Meanwhile, high-yield corporates and bank loans, the big winners of 2013, notched very modest returns of 0.6% and 0.5%, respectively. Emerging-markets debt continued to struggle upon growth concerns and widespread emerging-markets currency declines.

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

-0.65

Jan. 31, 2014

6.50

High

1.73

5.00

Low

-1.83

4.50

Average

0.14

3.00

Last Month (12-31-13)

-0.88

01-31-14

1.50

A Year Ago (01-31-13)

-0.76

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

2.66

Attractive 10.71

Jan. 31, 2014

12.00

High

10.71

9.00

Low

2.01

Average

4.07

6.00

Last Month (12-31-13)

2.84

3.00

A Year Ago (01-31-13)

3.49

01-31-14

0

Unattractive 2.01

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

Data as of Jan. 3 1, 2 014. 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.