21
Morningstar FundInvestor
August 2
013
Bond-Market Snapshot
Interest-Rate Review
Bond markets stabilized some in July after a rough June. After
spiking to a 2.7% yield early in the month, the 10-year Treasury
rallied after Fed chairman Ben Bernanke reaffirmed the Fed’s
commitment to an accommodative monetary policy. Still, the
10-year lost ground later in the month, and long-term and interme-
diate-term Treasuries continued their losing streak. Municipal
bonds also struggled in a month that featured the announcement
of Detroit’s bankruptcy filing. High-yield munis lost 2.2%, while
long-term munis fell 2.5%; intermediate-term munis were close to
flat for the month. Corporate bonds fared better, with investment-
grade names up 0.8% for the month, and high yield posting a
1.9% gain.
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
-
13
)
p
One Year Ago
(
07
-
31
-
12
)
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
Treasury and Municipal-Bond Yields
High-Yield and Treasury-Bond Yields
Municipal-Bond Spread Snapshot
Unattractive 1.73
Attractive -1.83
07-31-13
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 July 31
, 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.
July 31, 2013
-1.08
High
1.73
Low
-1.83
Average
0.17
Last Month
(06-30-13)
-0.96
A Year Ago
(07-31-12)
-1.07
July 31, 2013
3.60
High
10.71
Low
2.01
Average
4.10
Last Month
(06-30-13)
3.84
A Year Ago
(07-31-12)
4.53
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
