The yield curve flattened during the second quarter, indicating outperformance for longer-term bonds. The gap between the two- and 10-year notes fell by 23 basis points (0.23%). The yield on the two-year note increased by four basis points (0.04%), while the yield on the 10-year decreased by 19 basis points (0.19%) and the 30-year yield decreased by 20 basis points (0.20%). Mortgage-backed securities were the top-performing sector within the Index, followed by corporate bonds. Market participants continued to search for yield, fueling heavy inflows of cash into higher risk market segments.
The Fund returned 2.02% during the second quarter, closely tracking the benchmark. We 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.