21
Morningstar FundInvestor
July 2
013
Bond-Market Snapshot
Interest-Rate Review
Talk of Fed tapering led interest rates on taxable and municipal
bonds to bounce higher. Spreads between municipal bonds
and Treasuries grew slightly in response to growing problems for
municipal issuers such as Detroit. High-yield spreads also wid-
ened versus Treasuries, though they remain slightly below the aver-
age level. Municipal-bond and high-yield managers are telling
us that these moves could lead to a pretty good buying opportunity
if this trend continues.
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
(
06
-
30
-
13
)
p
One Year Ago
(
06
-
30
-
12
)
06-30-13
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
06-30-13
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 June 30
, 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.
June 30, 2013
-0.96
High
1.73
Low
-1.83
Average
0.18
Last Month
(05-31-13)
-0.86
A Year Ago
(06-30-12)
-1.18
June 30, 2013
3.84
High
10.71
Low
2.01
Average
4.10
Last Month
(05-31-13)
3.39
A Year Ago
(06-30-12)
5.02
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
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
