21
Morningstar FundInvestor
November
2013
Bond-Market Snapshot
Interest-Rate Review
Almost all segments of the fixed-income market posted positive
gains for the second month in a row during October. It was a period
of time that rewarded risk, with high-yield and emerging-markets
notching the biggest gains. Emerging-markets local-currency sover-
eign debt led the way with a 2.7% return, rebounding from steep
losses earlier this year. The U.S. corporate high-yield market gained
2.5%, while the investment-grade corporate segment fared well
with a 1.5% gain. U.S Treasury rates trended slightly lower during
the month, giving a boost to long duration U.S. Treasury securities.
Municipal bonds also continued to rebound after a rough summer
on the heels of Detroit’s bankruptcy filing and concerns about Puerto
Rico, with all segments of the market notching modest gains.
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
(
10
-
31
-
13
)
p
One Year Ago
(
10
-
31
-
12
)
10-31-13
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
10-31-13
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 Oct. 3
1, 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.
Oct. 31, 2013
-1.04
High
1.73
Low
-1.83
Average
0.15
Last Month
(09-30-13)
-1.05
A Year Ago
(10-31-12)
-0.93
Oct. 31, 2013
3.18
High
10.71
Low
2.01
Average
4.09
Last Month
(09-30-13)
3.35
A Year Ago
(10-31-12)
4.11
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
