21
Morningstar FundInvestor
June 2
013
Bond-Market Snapshot
Interest-Rate Review
Employment gains, improvements in the housing market, and
growing consumer confidence sent most bond sectors tumbling in
May as investors braced for a possible slowdown in the Federal
Reserve’s easing program. Long Treasuries fell by 6.2% as the yield
on the 30-year bond rose by almost half a percent. Intermediate-
term Treasuries also lost 3.2%. Agency mortgages dropped by close
to 1.5%, as did long-term and intermediate-term municipal bonds.
A strengthening U.S. dollar also led to losses for several global bond
indexes; local-currency emerging-markets debt lost 7.1%, while
hard-currency emerging-markets debt lost 3.8% and the Barclays
Global Aggregate fell 3.0%. Most credit sectors were also stung;
commercial mortgage-backed securities fell by 1.0% and high-yield
corporate bonds lost 0.6%.
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
(
05
-
31
-
13
)
p
One Year Ago
(
05
-
31
-
12
)
1 mo 3
6
1 yr
2
3
5
7
10
20 30
05-31-13
7.00
6.50
5.00
4.50
3.00
1.50
0.00
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
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
05-31-13
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 May 31,
20
13. 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.
May 31, 2013
-0.86
High
1.73
Low
-1.83
Average
0.18
Last Month
(04-30-13)
-0.91
A Year Ago
(05-31-12)
-1.09
May 31, 2013
3.39
High
10.71
Low
2.01
Average
4.11
Last Month
(04-30-13)
3.52
A Year Ago
(05-31-12)
5.02
