21
Morningstar FundInvestor
August 2
014
Bond-Market Snapshot
Interest-Rate Review
High-yield municipal bonds performed the best in July as the
Barclays High Yield Muni Index returned 0.63%. Long-term U.S.
Treasuries continued their strong rally, showing the highest
year-to-date returns and second-highest returns for the month.
Looking at the yield curve, 30-year U.S. Treasuries had the
biggest yield decline (and price increase), and the three- year
portion performed the worst. High-yield corporate debt did
not fare as well as high-yield munis. The Barclays US Corporate
High Yield and Bank of America Merrill Lynch US High Yield
Master indexes lost 1.33% and 1.32%, respectively.
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
(
07-31-14
)
p
One Year Ago
(
07-31-13
)
7.00
6.50
5.00
4.50
3.00
1.50
0.00
15.00
12.00
9.00
6.00
3.00
0.00
Treasury and Municipal-Bond Yields
High-Yield and Treasury-Bond Yields
Municipal-Bond Spread Snapshot
Unattractive
1.73
Attractive
-1.83
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 July 31
, 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.
July 31, 2014
-0.17
High
1.73
Low
-1.83
Average
0.12
Last Month
(06-30-14)
-0.33
A Year Ago
(07-31-13)
-0.96
July 31, 2014
2.62
High
10.71
Low
2.01
Average
4.03
Last Month
(06-30-14)
2.44
A Year Ago
(07-31-13)
3.84
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
07-31-14
07-31-14
