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Morningstar FundInvestor
January 2016
Bond-Market Snapshot
Interest-Rate Review
Following the Fed’s December interest-rate hike, the yield curve
shifted upward with movement most pronounced between
the one- and five-year maturities. U.S. Treasury Inflation-Protected
Securities fell 0.79% for the month. For all of 2015, municipals
were strong performers. The Barclays Municipal Index was up 3.3%
for the year, and the long-end of the muni market as measured
by the Barclays Muni 22+ Index shone even brighter with a 4.52%
gain. On the other hand, emerging markets and taxable high-
yield were the weakest spots in 2015. The Bank of America High
Yield Master II Index lost 4.64% in 2015, and local-currency
emerging-markets debt continued to take a pounding, ending the
year at a 17% loss.
Treasury Yield Curve (
%
)
Yield to maturity of current bills, notes, and bonds
p
Current
(
12-31-15
)
p
One Year Ago
(
12-31-14
)
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
, 2015
. 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, 2015
-0.04
High
1.73
Low
-1.83
Average
0.09
Last Month
(11-30-15)
-0.17
A Year Ago
(12-31-14)
-0.10
Dec. 31, 2015
4.68
High
10.71
Low
2.01
Average
4.00
Last Month
(11-30-15)
4.28
A Year Ago
(12-31-14)
3.52
12-31-15
12-31-15
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