23 / 772
21
Morningstar FundInvestor
January 2
015
Bond-Market Snapshot
Interest-Rate Review
Long-term Treasuries continued to perform the best in December
as they had done throughout the year. The Barclays US Long
Treasury Index’s 25.0% and 2.9% returns for the year 2014 and the
month December, respectively, were the best in all fixed-income
asset classes. The Barclays Municipal Long 22+ Year Index’s Dec-
ember 2014 return of 1.0% was second only to long Treasuries.
Further, its 15.4% return for the year 2014 was also strong, lagging
just long Treasuries. Short Treasury Inflation-Protected Securities
were the weakest performing in 2014, followed by global bonds.
The Barclays U.S. Treasury TIPS 0-5 Year Index’s 1.1% loss for 2014
and 1.3% loss for December 2014 was among the worst in fixed-
income asset classes.
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
(
12-31-14
)
p
One Year Ago
(
12-31-13
)
7.00
6.50
5.00
4.50
3.00
1.50
0.00
15.00
12.00
9.00
6.00
3.00
0.00
Treasury and Municipal-Bond Yields
High-Yield and Treasury-Bond Yields
Municipal-Bond Spread Snapshot
Unattractive
1.73
Attractive
-1.83
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 Dec. 31
,2014
. 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.
Dec. 31, 2014
-0.10
High
1.73
Low
-1.83
Average
0.12
Last Month
(11-30-14)
-0.16
A Year Ago
(12-31-13)
-0.88
Dec. 31, 2014
3.52
High
10.71
Low
2.01
Average
4.00
Last Month
(11-30-14)
3.18
A Year Ago
(12-31-13)
2.84
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
1 mo 3
6
1 yr
2
3
5
7
10
20
30
12-31-14
12-31-14