After rising sharply early in 2013, interest rates eased to finish the quarter somewhat higher along most of the U.S. Treasury yield curve. The curve steepened as the two-year yield finished unchanged at 0.25%, the five-year went from 0.72% to 0.77%, the 10-year from 1.78% to 1.87% and the 30-year from 2.95% to 3.10%. On a duration-adjusted basis, the Barclays U.S. Aggregate Bond Index return of -0.12% narrowly outperformed U.S. Treasury securities for the first quarter. The credit sector was the leading performer within the Index, followed by U.S. agencies.
The Funds return of -0.18% closely tracked the return of the Index for the first quarter, with the difference in returns driven largely by management fees and expenses. We will continue to invest in a sample of securities that are representative of the Index in an effort to provide returns that closely approximate those of the Index.
If you are a long-term, income-oriented investor who is looking to diversify your investments by gaining broad exposure to the U.S. bond market, then this Fund may be right for you. It offers a diversified portfolio of bond securities approximating the Lehman Brothers U.S. Aggregate Index.
- Passively managed in an effort to replicate the performance and composition of the Barclays U.S. Aggregate Bond Index.
- Gain broad exposure to the U.S. Treasury, government agency, investment-grade corporate bond, mortgage- and asset-backed sectors of the fixed income markets.
- Provide investors with a way to gain broad exposure to U.S. bond market.