While second-quarter data showed signs of stabilizing, the slower-than-expected growth trends provided a tailwind for Treasuries. U.S. nonfarm payrolls continued to improve slowly averaging 272,000 for the months of March through May while the unemployment rate fell to 6.1%. First-quarter gross domestic product (GDP) was revised down to -2.9% from initial estimates at -1.0% as the harsh weather conditions took a larger toll on the economy than first thought. The yield curve continued its flattening trend amid stubbornly tepid inflation and strong demand for longer-term bonds. Two-year Treasury yields rose four basis points (0.04%) in the second quarter, while five-year Treasury yields fell nine basis points (0.09%); 10-year yields fell 19 basis points (0.19%); and 30-year yields fell 20 basis points (0.20%).
The Barclays U.S. Treasury Index returned 1.35% during the quarter. As designed, the Fund performed in line with the Index with a total return of 1.31%. We continue to invest with the goal of providing returns that closely approximate those of the Index.
If you are an income-oriented investor who is looking to diversify your investments by gaining broad exposure to the U.S. Treasury market then this Fund may be right for you. It offers a diversified portfolio of Treasury securities approximating the Barclays U.S. Treasury Index.
- Passively managed in an effort to replicate the performance and composition of the Barclays U.S. Treasury Index.
- Invest substantially all (and at least 80%) of its assets in a representative sample of the U.S. Treasury obligations included in the Index.
- Provide investors with a way to gain broad exposure to U.S. Treasury market.