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21

Morningstar FundInvestor

March 2016

Bond-Market Snapshot

Interest-Rate Review

The Treasury yield curve flattened over February, with the Barclays

US Treasury Long Index gaining 2.98% for the month and 8.15% for

the year to date. The Barclays US Aggregate posted a return of

0.71%, buoyed by modest monthly gains across all of its subsec-

tors. Municipal markets provided muted though positive returns,

and the Bank of America US HY Master II added 0.47% after three

previous months of losses. Particularly noteworthy, the Barclays

Global Aggregate benefited from loosening monetary policies across

regions and delivered 2.23% – its highest monthly return in the

past three years.

Treasury Yield Curve (

%

)

Yield to maturity of current bills, notes, and bonds

p

Current

(0

2-29-16

)

p

One Year Ago

(0

2-28-15

)

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 Feb. 29

, 2016

. 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.

Feb. 29, 2016

-0.20

High

1.73

Low

-1.83

Average

0.09

Last Month

(01-31-16)

-0.05

A Year Ago

(02-28-15)

-0.15

Feb. 29, 2016

5.42

High

10.71

Low

2.01

Average

4.01

Last Month

(01-31-16)

5.08

A Year Ago

(02-28-15)

3.34

02-29-16

02-29-16

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

Maturity

6.00

5.00

4.00

3.00

2.00

1.00

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 14 15

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15