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Morningstar FundInvestor
June 2016
Bond-Market Snapshot
Interest-Rate Review
The bond market was little changed in May as the chances of a
June rate hike have risen. The Barclays U.S. Aggregate Index gener-
ated a modest 0.03% return for May, and the Barclays Corporate
Index lost 0.08% for the month. An improving U.S. economic outlook
underpinned positive return in mortgages, with the Barclays U.S.
MBS Index generating 0.13% of return. The yield curve flattened at
the shorter end, as anticipation of a U.S. Federal Reserve interest-
rate rise intensifies. The municipal markets remain a bright spot; the
Barclays Municipal TR Index delivered its 11th straight month of
positive returns and provided 0.27% for May. Weak overseas econo-
mic growth has continued to drag on the local-currency-denominated
JPM GBI-EM Global Composite, which lost 5.58% for the month
but posted a 7.91% gain for the year to date.
Treasury Yield Curve (
%
)
Yield to maturity of current bills, notes, and bonds
p
Current
(0
5-31-16
)
p
One Year Ago
(0
5-31-15
)
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 May 31
, 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.
May 31, 2016
-0.13
High
1.73
Low
-1.83
Average
0.08
Last Month
(04-30-16)
-0.22
A Year Ago
(05-31-15)
-0.40
May 31, 2016
4.37
High
10.71
Low
2.01
Average
4.02
Last Month
(04-30-16)
4.28
A Year Ago
(05-31-15)
3.44
05-31-16
05-31-16
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