21
Morningstar FundInvestor
January 2
014
Bond-Market Snapshot
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.
Treasury Yield Curve (
%
)
Maturity
6.00
5.00
4.00
3.00
2.00
1.00
Yield to maturity of current bills, notes, and bonds
p
Current
(
12
-
31
-
13
)
p
One Year Ago
(
12
-
31
-
12
)
12-31-13
7.00
6.50
5.00
4.50
3.00
1.50
0.00
15.00
12.00
9.00
6.00
3.00
0
Treasury and Municipal-Bond Yields
High-Yield and Treasury-Bond Yields
Municipal-Bond Spread Snapshot
Unattractive
1.73
Attractive
-1.83
12-31-13
High-Yield Bond Spread Snapshot
Attractive
10.71
Unattractive
2.01
p
Vanguard Interm-Term Tax-Exempt
p
Vanguard Interm-Term
U.S.
Treasury
p
Vanguard High-Yield Corporate
p
Vanguard Interm-Term
U.S.
Treasury
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.
Dec. 31, 2013
-0.88
High
1.73
Low
-1.83
Average
0.14
Last Month
(11-30-13)
-0.98
A Year Ago
(12-31-12)
-0.86
Dec. 31, 2013
2.84
High
10.71
Low
2.01
Average
4.08
Last Month
(11-30-13)
3.02
A Year Ago
(12-31-12)
3.81
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
1 mo 3
6
1 yr
2
3
5
7
10
20
30
