21
Morningstar FundInvestor
February 2
014
Bond-Market Snapshot
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.
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
(
01
-
31
-
14
)
p
One Year Ago
(
01
-
31
-
13
)
01-31-14
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
01-31-14
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 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.
Jan. 31, 2014
-0.65
High
1.73
Low
-1.83
Average
0.14
Last Month
(12-31-13)
-0.88
A Year Ago
(01-31-13)
-0.76
Jan. 31, 2014
2.66
High
10.71
Low
2.01
Average
4.07
Last Month
(12-31-13)
2.84
A Year Ago
(01-31-13)
3.49
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
