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Morningstar FundInvestor
September 2016
Bond-Market Snapshot
Interest-Rate Review
Bonds didn’t move much in August. The Barclays U.S. Aggregate
Bond Index lost 11 basis points—its first negative monthly return
since the start of the year—and was weighed down by a roughly
50-basis-point loss on the Barclays U.S. Government Index.
As the Federal Reserve announced that it would consider a rate
increase if economic fundamentals remain steady, the U.S.
Treasury yield curve lifted across all maturities for the month. Long
duration Treasuries, in particular, lost a percentage point but
remain outstanding year-to-date performers with a gain of 17%.
Municipal markets continued to receive inflows as investors
scavenged for yield, and the Barclays Municipal TR Index returned
13 basis points, supported by strong demand.
Treasury Yield Curve (
%
)
Yield to maturity of current bills, notes, and bonds
p
Current
(
08-31-16
)
p
One Year Ago
(
08-31-15
)
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 Aug. 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.
Aug. 31, 2016
-0.17
High
1.73
Low
-1.83
Average
0.08
Last Month
(07-31-16)
-0.27
A Year Ago
(08-31-15)
-0.34
Aug. 31, 2016
3.83
High
10.71
Low
2.01
Average
4.02
Last Month
(07-31-16)
4.07
A Year Ago
(08-31-15)
4.16
08-31-16
08-31-16
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