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Morningstar FundInvestor
August 2016
Bond-Market Snapshot
Interest-Rate Review
Bonds continued to rally as the Barclays U.S. Aggregate Bond Index
rose 0.6% in July. The yield curve continued to flatten, with the
Barclays U.S. Treasury Long Index growing by 2.2% for the month
and up a whopping 17.7% for the year to date. Yield-hungry
investors also drove the Barclays IG Corporate Index up 1.5% for the
month. Although an energy sell-off hit high-yield hard from
November through February, the sector has bounced back, with a
13% return from March through the end of July. Although inflation
remains stubbornly low, the Barclays U.S. TIPS Index rose 0.9% for
the month.
Treasury Yield Curve (
%
)
Yield to maturity of current bills, notes, and bonds
p
Current
(
07-31-16
)
p
One Year Ago
(
7-31-15
)
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 July 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.
July 31, 2016
-0.27
High
1.73
Low
-1.83
Average
0.08
Last Month
(06-30-16)
-0.24
A Year Ago
(07-31-15)
-0.30
July 31, 2016
4.07
High
10.71
Low
2.01
Average
4.02
Last Month
(06-30-16)
4.45
A Year Ago
(07-31-15)
3.70
07-31-16
07-31-16
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